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REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
i
TABLE OF CONTENTS
TABLE OF CONTENTS ........................................................................................................ I
ABBREVIATIONS AND ACRONYMS ............................................................................... V
FOREWORD BY THE AUDITOR GENERAL ...................................................................8
EXECUTIVE SUMMARY ...................................................................................................26
REPORT ON OAG ACTIVITIES DURING THE YEAR ................................................27
1.1 HISTORICAL BACKGROUND .................................................................................................... 27
1.2 MANDATE AND FUNCTIONS OF THE AUDITOR GENERAL ............................................... 27
1.3 OAG VISION, MISSION AND CORE VALUES .......................................................................... 28
1.4 OAG STRUCTURE AND STAFFING ........................................................................................... 28
1.5 STRATEGIC PLAN IMPLEMENTATION ................................................................................... 29
1.6 FINANCIAL MANAGEMENT AT OAG ...................................................................................... 33
AUDIT COVERAGE AND AUDIT RESULTS ..................................................................35
2.1 COVERAGE AND RESULTS FOR FINANCIAL AUDITS ..................................................... 35
2.1.1 AUDIT COVERAGE FOR FINANCIAL AUDITS OF PUBLIC ENTITIES AND
PROJECTS 35
2.1.2 AUDIT OPINIONS ISSUED FOR PUBLIC ENTITIES AND PROJECTS ...................... 35
2.1.3 QUESTIONED EXPENDITURE ARISING FROM MISMANAGEMENT OR
WASTEFUL EXPENDITURE ............................................................................................................. 37
2.2 COVERAGE AND RESULTS FOR PEFORMANCE AND SPECIAL AUDITS ..................... 38
TRACKING IMPLEMENTATION OF AUDITOR GENERAL’S AUDIT
RECOMMENDATIONS .......................................................................................................39
3.1 STATUS OF IMPLEMENTATION OF PREVIOUS AUDIT RECOMMENDATIONS .......... 39
KEY FINDINGS IDENTIFIED IN PUBLIC FINANCIAL MANAGEMENT SYSTEM
..................................................................................................................................................40
4.1 GAPS IN ACCOUNTING AND FINANCIAL REPORTING SYSTEMS................................. 40
4.1.1 ERRORS AND OMISSIONS IN FINANCIAL STATEMENTS OF BUDGET
AGENCIES 40
4.2 IDLE ASSETS, DELAYED CONTRACTS AND ABANDONED WORKS AND PROJECTS42
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FOR THE YEAR ENDED 30 JUNE 2015
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4.2.1 WEAKNESSES IN CONTRACT MANAGEMENT, DELAYED PROJECTS AND
ABANDONED WORKS ...................................................................................................................... 42
4.2.2 CONCERNS OVER PERSISTENT CASES OF IDLE ASSETS AND FAILED
PROJECTS 46
KEY FINDINGS FROM AUDIT OF GOVERNMENT BUSINESS ENTERPRISES
AND BOARDS .......................................................................................................................47
5.1 RWANDA SOCIAL SECURITY BOARD (RSSB) ................................................................... 47
5.1.1 INAPPROPRIATE ACCOUNTING AND BOOK KEEPING ARRANGEMENT FOR
DIFFERENT FUNDS UNDER RSSB ................................................................................................. 47
5.1.2 UNRELIABLE ACCOUNTING RECORDS AND FINANCIAL STATEMENTS .......... 48
5.1.3 EROSION OF INVESTMENT VALUE THREATENING SUSTAINABILITY OF
PENSION FUND .................................................................................................................................. 48
5.1.4 INADEQUATE MONITORING OF INVESTMENTS ..................................................... 49
5.1.5 WASTEFUL AND INELIGIBLE EXPENDITURE IN RSSB .......................................... 49
5.1.6 GAPS IN DATABASE OF BENEFICIARIES .................................................................. 50
5.2 RWANDA REVENUE AUTHORITY (RRA) ........................................................................... 50
5.2.1 GAPS IN REVENUE COLLECTION AND REPORTING SYSTEMS............................ 50
5.2.2 GAPS IN RRA TAX AUDITS ........................................................................................... 50
5.2.3 GAPS IN REGISTRY AND FOLLOW UP OF TAXPAYERS ......................................... 51
5.2.4 CHALLENGES IN RECOVERING TAX ARREARS ...................................................... 52
5.3 ENERGY, WATER AND SANITATION AUTHORITY (EWSA) ........................................... 53
5.3.1 LACK OF PROPER ACCOUNTABILITY FOR EWSA OPERATIONS ........................ 53
5.3.2 HIGH COST OF PRODUCTION THREATENING SUSTAINABILITY OF SERVICES
53
5.3.3 DELAYED COMPLETION OF PROJECTS ..................................................................... 54
5.3.4 POWER PLANTS OPERATING BELOW INSTALLED CAPACITY ............................ 55
5.3.5 LACK OF ACCOUNTABILITY FOR HIGH VOLUME OF WATER AND
ELECTRICITY PRODUCED .............................................................................................................. 55
5.4 RWANDA AGRICULTURAL BOARD (RAB) ........................................................................ 56
5.4.1 CONCERNS WITH IMPLEMENTATION OF THE CROP INTENSIFICATION
PROGRAM 56
5.4.2 SLOW RECOVERY OF FUNDS FROM SALE OF FERTILIZERS BY POST-
HARVEST HANDLING AND STORAGE TASKFORCE ................................................................. 57
5.4.3 CONCERNS IN IRRIGATION AND MECHANISATION .............................................. 57
5.5 RWANDA BIOMEDICAL CENTRE (RBC) ............................................................................. 60
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5.5.1 GAPS IN ACCOUNTING AND FINANCIAL MANAGEMENT AT RBC ..................... 60
5.5.2 INCREASING CASES OF EXPIRED DRUGS ................................................................. 61
5.6 RWANDA EDUCATIONAL BOARD (REB) ........................................................................... 62
5.6.1 PERSISTENT WEAKNESSES IN IMPLEMENTATION OF ONE LAPTOP PER CHILD
PROGRAM 62
5.6.2 CONCERNS ON MANAGEMENT OF CONTRACTS FOR SCHOOL
CONSTRUCTION ................................................................................................................................ 63
5.7 UNIVERSITY OF RWANDA (UR) ........................................................................................... 73
5.7.1 ACCOUNTING AND FINANCIAL MANAGEMENT ISSUES AT UNIVERSITY OF
RWANDA 73
5.7.2 SLOW IMPLEMENTATION OF AUDIT RECOMMENDATIONS BY UR COLLEGES
75
5.8 RWANDA DEVELOPMENT BOARD (RDB) .......................................................................... 76
5.8.1 LOW LEVEL OF IMPLEMENTATION OF REGIONAL INFORMATION AND
COMMUNICATION TECHNOLOGIES FOR EXCELLENCE PROJECT AT RDB ........................ 76
5.8.2 CONCERNS ON UTILISATION OF ICT TOOLS: CASE OF DOCUMENT TRACKING
& WORK FLOW MANAGEMENT SYSTEM (DTWMS) - E-MBONI AT RDB ............................. 76
5.8.3 KEY ISSUES ON STRATEGIC MANAGEMENT OF PRIVATIZATION ACTIVITIES
78
KEY FINDINGS FROM AUDIT OF GOVERNMENT PROGRAMS AND PROJECTS
..................................................................................................................................................83
6.1 HEALTH SECTOR PROGRAMMES AND PROJECTS .......................................................... 83
6.2 KEY CONCERNS FROM MANAGEMENT OF INCOME GENERATING ACTIVITIES
(IGA) PROGRAM OF FARG ..................................................................................................... 86
6.3 KEY CONCERS FROM AUDIT OF IMPLEMENTATION OF CITY OF KIGALI MASTER
PLAN .......................................................................................................................................... 88
6.4 KEY CONCERNS FROM PERFORMANCE AUDIT ON MUNICIPAL SOLID AND LIQUID
(SEWAGE) WASTE MANAGEMENT IN CITY OF KIGALI .................................................. 89
KEY FINDINGS FROM AUDIT OF LOCAL GOVERNMENTS ...................................93
7.1 CONCERNS OVER ACCOUNTABILITY IN NON-BUDGET AGENCIES (NBAS) ................. 93
7.1.1 LACK OF PROPER FOLLOW UP AND REVIEW OF NBA FINANCIAL
TRANSACTIONS ................................................................................................................................ 93
7.1.2 CONTINUED WEAKNSESSES IN ACCOUNTING FOR NON-BUDGET AGENCIES
(NBAs) 93
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7.2 GAPS NOTED IN REVENUE COLLECTION BY LOCAL GOVERNMENTS .......................... 95
7.3 GAPS NOTED IN VUP FINANCIAL SERVICES COMPONENT ............................................... 96
7.3.1 LOW RATE OF RECOVERY OF VUP LOANS .............................................................. 96
7.3.2 NONEXISTENCE OF PROJECTS MEANT TO BE ESTABLISHED USING VUP
LOANS 97
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FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
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ABBREVIATIONS AND ACRONYMS
AFD Agence Française de Développement
AFROSAI-E African Organization of Supreme Audit Institutions-English speaking
AGI Adolescent Girls Initiative
BNR National Bank of Rwanda
BRD Banque Rwandaise de Dévelopement
CHUK University Teaching Hospital- Kigali
CNLG National Commission For The Fight Against Genocide
CSRP Civil Service Reform Project
CTAMS Mutual Health Technical Support Cell
EAAPAC East Africa Association of Public Accounts Committees
EAPHLN East Africa Public Health Laboratory Networking Project
EARP Electricity Access Rollout Program
EASSDP
Electricity Access Scale-Up and Sector Wide Approach Development
Project
EATTFP East Africa Trade and Transport Facilitation Project
EDPRS Economic Development and Poverty Reduction Strategy
EIF Enhanced Integrated Framework
EWSA Energy, Water and Sanitation Authority
FARG Genocide Survivors Fund
FER Fond d’Entretien Routier (Road Maintenance Fund)
GBEs Government Business Enterprises
GMO Gender Monitoring Office
GoR Government of Rwanda
ICPAR Institute of Certified Public Accountants of Rwanda
IDF Institutional Development Fund
IFMIS Integrated Financial Management Information System
INTOSAI International Organisation of Supreme Audit Institutions
IPPIS Integrated Personnel and Payroll Information System
KWAMP Kirehe Community Based Watershed Management Project
LEVEMP Lake Victoria Environmental Management Project
LODA Local Administrative Entities Development Agency
LWH Land Husbandry Water harvesting and Hillside Irrigation
MDTF Multi Donor Trust Fund
MHC Media High Council
MIDIMAR Ministry of Disaster Management and Refugee Affairs
MIFOTRA Ministry of Labour and Skills Development
MINADEF Ministry of Defense
MINAFFET Ministry of Foreign Affairs
MINAGRI Ministry of Agriculture
MINALOC Ministry of Local Government
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MINEAC Ministry of East African Community
MINECOFIN Ministry of Finance and Economic Planning
MINEDUC Ministry of Education
MINICOM Ministry of Trade and Industry
MINIFOM Ministry of Forestry and Mines
MINIJUST Ministry of Justice
MININFRA Ministry of Infrastructure
MININTER Ministry of Internal Affairs
MINIRENA Ministry of Natural Resources
MINISANTE Ministry of Health
MINISPOC Ministry of Sports and Culture
MINIYOUTH Ministry of Youth, Culture and Sports
NBA Non Budget Agency
NDIS National Decentralization Implementation Secretariat
NEC National Electoral Commission
NHRC National Human Rights Commission
NIDA National Identification Agency
NIMR National Institute of Museums of Rwanda
NISR National Institute of Statistics
NPPA National Public Prosecution Authority
NURC National Unity and Reconciliation Commission
OAG Office of the Auditor General of State Finances
ONATRACOM Rwanda Public Transport Authority
OP Payment Order
ORINFOR National Office for Information
OTR Ordonnateur Trésorier du Rwanda (Central Treasury of Rwanda)
PAC Public Accounts Committee
PADAB Bugesera Agricultural Development Support Project
PAPSTA Support Project to the Strategic Plan for the Agriculture Transformation
PAYE Pay As You Earn
PFM Public Financial Management Reform Basket Fund
PHHS TF Post Harvest Handling and Storage Task Force
PPF (LISP) Project Preparation Facility of the Livestock Infrastructure Support
Programme
PPPMER Rural Small And Micro Enterprises Project
PRIMATURE Prime Minister's Office
PSCBP Public Sector Capacity Building Project
PSGG Project for Strengthening Institutional Framework for Good Governance
RAB Rwanda Agricultural Board
RBA Rwanda Broadcasting Agency
RBC Rwanda Biomedical Board
RCA Rwanda Cooperative Agency
RCAA Rwanda Civil Aviation Authority
RCIPRW Regional Communication Infrastructure Program – Rwanda Project
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RCS Rwanda Correctional Services
RDB Rwanda Development Board
RDRP Rwanda Demobilization and Reintegration Programme
REB Rwanda Education Board
REMA Rwanda Environment Management Authority
RHA Rwanda Housing Authority
RNP Rwanda National Police
RNRA Rwanda Natural Resources Authority
RPPA Rwanda Public Procurement Authority
RRA Rwanda Revenue Authority
RSSB Rwanda Social Security Board
RSSP III Rural Sector Support Project Phase III
RTDA Rwanda Transport Development Agency
RURA Rwanda Utilities Regulatory Agency
SADCOPACs
Southern Africa Development Community Organisation of Public Accounts
Committees
SEDP Sustainable Energy Development Project
SDP Skills Development Project
SFAR Student Financing Agency of Rwanda
SONARWA Société Nouvelle d’Assurances du Rwanda
TSDP Transport Sector Development Project
UAF Universal Access Fund
UBPR Union des Banques Populaires du Rwanda
UNAIDS United Nations Programme on HIV/AIDS
USPLS Public Sector Umbrella in Fight Against Aids
VUP Vision Umurenge program
WDA Work Force Development
SMTO Small, Medium Taxpayers Office
LTO Large Taxpayers Office
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FOR THE YEAR ENDED 30 JUNE 2015
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FOREWORD BY THE AUDITOR GENERAL
Article 166 of the Constitution of the Republic
of Rwanda of June 2003 revised in 2015
stipulates that the Auditor General shall submit
each year to each Chamber of Parliament, prior
to the commencement of the session devoted to
the examination of the budget of the following
year, a complete report on the state financial
statements for the previous year. That report
must indicate the manner in which the budget
was utilised, unnecessary expenditure which
was incurred or expenses which were contrary
to the law and whether there was wasteful
expenditure or misappropriation.
Accordingly, I now submit to Parliament a report on the audits conducted during the period
from June 2015 to 30 April 2016. The audits covered state consolidated financial statements;
expenditure incurred by Government entities for the year ended 30 June 2015 and operations
of Government Business Enterprises. This report presents cross cutting and other key issues
of national impact noted during financial audits and performance audits. Individual reports
containing the audit opinion and details of all findings have been issued for each audited
entity.
This report also covers other activities of the Auditor General’s office for the year ended 30
June 2015 and key achievements realized during the year.
OAG AUDIT FOCUS IN THIS AUDIT CYCLE
Government Business Enterprises (GBEs) and Government Boards continue to be risky
public enterprises while at the same time are at the forefront of implementing key
Government programmes. As such, there was increased focus on these entities during the
year with audits covering RRA, RSSB, EWSA, REB, RAB, RDB, RGB, RSB, RBC and
NAEB. In addition, the OAG audited former public universities and colleges that were
merged to form University of Rwanda. Some of these entities’ activities are not part of the
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
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state consolidated financial statements. The OAG also conducted thirteen (13) performance
and special audits.
The office continues to support Government decentralized policy through full coverage of
Local Governments and to audit all Government Projects receiving funding from the World
Bank and the entire grant from Global Fund for HIV and Malaria Programmes in Rwanda.
The audits also covered the two Chambers of Parliament as oversight institutions and all
supervising ministries and entities of different Government programmes in various sectors of
the economy.
NUMBER OF ENTITIES AUDITED
In terms of number of entities audited, the audits covered state consolidated financial
statements and 157 public entities and projects compared to 131 public entities and
projects in my previous annual report, resulting in issue of 159 audit reports compared to
157 audit reports in my previous annual report.
AUDIT COVERAGE
The expenditure incurred by entities audited during the period June 2015 to 30 April 2016
represents 82% of the reported Government Expenditure for the year ended 30 June 2015,
compared to 81% for the year ended 30 June 2014. The total Government expenditure
reported in State consolidated financial statements for the year ended 30 June 2015 amounted
to Frw 1,826,772,990,826 compared to Frw 1,762,021,652,552 for the previous year ended
30 June 2014. This coverage is in line with PFM target of 82% of expenditure incurred by
Government during the year ended 30 June 2015.
The above coverage was achieved, alongside audit of State consolidated financial statements,
audit of nine (9) former public universities and colleges that were merged to form University
of Rwanda and two affiliated companies of KISTCO and KHBID, EWSA, RSSB and RRA
revenue collection system. The OAG also chaired the Audit Commission for the East African
Community for the year ended 30 June 2015 with full time involvement of four (4) OAG
senior audit staff for two and half months, as well as involvement and participation in PAC
activities especially during the months of July and August 2015.
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FOR THE YEAR ENDED 30 JUNE 2015
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VALUE FOR MONEY AUDITS
The office conducted 13 performance and special audits during the year compared to 12
reports issued in last year annual report. The performance and special audits covered and
respective sectors are shown below.
Performance audit conducted Sector covered
1 Performance audit on the implementation of City of Kigali Master Plan Urban Development
2 Performance audit on management of income generating activities program
OF FARG
Social Protection
3 Performance audit on Government revenues from Extractive Industries Finance
4 Performance audit on Municipal solid and liquid (sludge from septic tanks)
waste management in City of Kigali
Environment
5 Management of contracts: Case of schools construction Education
6 Procurement and management of drugs and medical supplies and its impact on
health care at University Teaching Hospital-Kigali (UTH-K/CHUK)
Health
7 Review of implementation of Healthy Futures project at Rwanda Biomedical
Center
Health
8 Performance audit on strategic management of privatization activities Finance
9 Audit of revenue collection system at Rwanda Revenue Authority Finance
10 Performance audit on utilization of ICT tools - Case of document tracking &
work flow management system
ICT
11 Integrated payroll and personnel information system (IPPIS) Operations ICT/Public Service
12 Information Systems/Technology audit at RSSB ICT/Social Security
13 Information Systems/Technology audit at RRA ICT/Finance
OVERVIEW OF AUDIT RESULTS
1 Audit Opinions issued on financial statements of public entities and trend
The number of reports with unqualified audit opinion on financial statements increased from
57 reports (36%) last year to 78 reports (50%) in this annual report out of the 157 reports
issued by 29 April 2016. These reports comprise of 16 reports for Ministries, 34 for
Government projects; 26 reports for Central Government entities, 1 report for a GBE and
1 report for a Board. The increase in number of entities obtaining unqualified audit opinion
on financial statements is an indicator that Government entities are progressively embracing
appropriate financial management practices.
Of the 157 reports issued, 61 reports (39%) got unqualified opinion on compliance aspects.
These included 12 Ministries, 29 Government projects, and 20 Other Central Government
entities.
All Government Business Enterprises and Boards (except RRA Budget Agency and
Rwanda Standards Board) got qualified audit opinion on financial statements like it was in
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
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the previous audits. All the entities in this cluster got qualified opinion on compliance
aspects. The improvements in financial management and compliance with laws and
regulations in Government Business Enterprises and Government Boards remain dismal
despite these entities being in charge of implementing key Government programmes and
managing a significant chunk of Government funds. There is need for a concerted effort by
the Office of the Accountant General to further support and push Chief Budget Managers of
Government Business Enterprises and Government Boards to embrace PFM initiatives
towards improving financial management and accountability practices.
Districts
There were improvements noted in some districts and City of Kigali. Gakenke district for the
last 3 consecutive years has obtained an except for audit opinion on financial statements.
Improvements were also noted in the Districts of Nyaruguru, Kirehe, Nyagatare, Rwamagana
which obtained an except for opinion on compliance with laws and regulations. In addition,
City of Kigali obtained an except for opinion on both financial statements and compliance
issues. This shows that local governments can further improve in management of public
funds. I recommend MINECOFIN to further support local government entities in
strengthening the internal audit unit by ensuring that it is sufficiently staffed, trained and
deployed to support management in addressing the internal control weaknesses highlighted in
my audit reports. I also recommend MINECOFIN to further support the finance departments
to acquire continuous professional trainings with the aim of ensuring they have a highly
skilled finance team.
2 Status of implementation of prior year audit recommendations
Overall, public entities implemented 51% of the audit recommendations. Government Boards
and Business Enterprises continue to perform at the least in implementation of Auditor
General’s recommendations having not implemented 59% of the previous audit
recommendations. Among the worst performers in this cluster is RSSB that did not
implement 77% of recommendations; EWSA Utility that did not implement 81% of the
recommendations; EWSA Development Unit that did not implement 65% of the
recommendations; and REB that did not implement 64% of the audit recommendations.
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FOR THE YEAR ENDED 30 JUNE 2015
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SUMMARY OF KEY ISSUES IDENTIFIED DURING AUDITS
1. Inappropriate financial reporting framework adopted by public entities: Some
Government entities continue to apply the modified cash basis of accounting yet given the
nature of their activities, the resulting financial statements do not reflect the true picture of
the financial performance and position. Significant transactions and balances are omitted
from financial statements prepared on the basis of modified cash basis of accounting
thereby discounting their usability. For instance the financial statements of Rwanda
Biomedical Center/MPPD (Former CAMERWA), do not disclose significant balances for
fixed assets of Frw 3,591,378,629 and inventory of Frw 29,159,477,679. For the case of
RDB, the financial statements do not include investments worth Frw 4,273,710,000,
preference redeemable Shares in Olleh Network Rwanda worth Frw 79,010,726,592 and
Africa Olleh Service worth Frw 5,090,280,000, and fixed assets worth Frw
11,135,796,597 acquired and expensed during the year.
Omission of significant balances from the books of account and financial statements
discounts the usefulness of the reported information.
2. Persistent cases of delayed contracts and abandoned works: Weaknesses in contract
management are still prevalent in most public entities and have resulted into increased cost
of Government projects, significant delays in completion and lack of value for money
from many Government projects. There are also various failed or abandoned projects
which have denied beneficiaries envisaged facilities and services. The prior year audits
identified contracts for 77 projects worth Frw 126,052,898,036 that had delayed and were
not completed within contract period. The status of these contracts was as follows.
Sixteen (16) contracts (21%) involving Frw 3,581,716,475 were completed and final
handover done;
Thirty seven (37) contracts (48%) involving Frw 81,769,961,483 had progressed and
provisional handover had been done; and
Twenty four (24) contracts (31%) involving Frw 40,701,220,078 had not been
completed as at the time of the current audits.
Current year contracts delayed or abandoned
Cases of delayed and abandoned works identified during current audits amounted to Frw
32,492,344,915 for 70 contracts. Of these, 12 contracts worth Frw 4,370,563,354 were
abandoned
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FOR THE YEAR ENDED 30 JUNE 2015
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3. Increasing cases of idle assets: Various public entities continue to hold idle assets in
which significant amounts of funds have been invested. Assets worth Frw 7,920,352,340
were identified as idle. Examples include idle stock of electricity and water materials at
EWSA worth Frw 1,620,926,869; Cassava factory involving Frw 768,070,428 for
Ngororero district; and Nkombo guest house for Rusizi District worth Frw 285,667,659
and RSSB assets worth Frw 978,506,025 not utilised.
4. Increasing cases of questioned expenditure: Expenditure to the tune of Frw
18,965,202,896 was incurred by Government entities on ineligible and irregular expenses.
This comprises of unsupported expenditure (Frw 12,785,406,805); partially supported
expenditure (Frw 3,838,478,979); wasteful expenditure (Frw 1,723,841,679); ineligible
allowances (Frw 443,736,357) and fraudulent payments (Frw 173,469,076). These were
mainly noted for EWSA, RBC, University of Rwanda colleges and Districts.
Efforts to recover funds lost in previously reported fraudulent cases have not yielded
significant progress. A total of Frw 1,553,750,866 out of the Frw 1,627,988,639 reported
in fraudulent cases identified from OAG audits since 2011 had not been recovered by the
time of the current audits.
5. Investment management and accounting concerns at Rwanda Social Security Board
(RSSB)
Inappropriate accounting and book keeping arrangement for different funds
under RSSB: RSSB continues to perform the accounting and financial reporting
function in one set of books of account for pension and medical schemes and recently
added Mutuelle De sante. This has resulted in misallocation of some transactions and
balances across schemes and arbitrary allocation of operating expenditure across the
schemes that does not reflect the level of consumption of the shared services by the
three schemes.
Maintenance of one set of books of account for the current three schemes under RSSB
and arbitrary apportioning of operating costs is likely to result in using funds of one
scheme in meeting obligations of the other. Overtime funds of one scheme could as a
result be eroded to support activities of the other.
Unreliable accounting records and financial statements: The RSSB financial
statements contain inaccuracies and are therefore not reliable for proper decision
making. These mainly arise from errors and inappropriate basis applied in valuing
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
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unquoted/unlisted equity investments with questionable fair value gains of Frw
9,583,023,901, overstatement of fair value of quoted/listed equity investments by Frw
2,101,452,266, absence of valuation of investment properties and continued reporting
of outdated values of investment properties established in June 2012, weaknesses in
tracking and accounting for mortgage loans relating to houses located at Gacuriro 2020
Estate with borrowers where balances totalling to Frw 171,063,283 was reported at 30
June 2015 yet they had fully paid their balances and were issued with clearance
certificates, unallocated mortgage repayments amounting to Frw 490,850,793 reported
under liabilities in the financial statements, unsupported creditors of Frw 950,595,239,
creditors with credit balance of Frw 4,813,735,245 and debit balance of Frw
253,088,772 with no individual/itemised listing of creditors.
Erosion of investment value hence threatening sustainability of the pension fund:
In the previous annual report, there were sixteen (16) equity investments where RSSB
had invested a total amount of Frw 65,305,671,206 that had not paid any dividend
from the time of initial acquisition or establishment. During the year ended 30 June
2015, these same investments still did not generate any return to RSSB. RSSB further
injected an amount of Frw 16,660,891,275 to three of the investments in question
thereby increasing total investment in non-performing ventures to Frw
81,966,562,481. A common attribute to the sixteen (16) equity investments above is
that they were acquired without proper analysis by the investment committee and
review and approval by the Board of Directors. Continuing to hold investments where
no return is earned has a negative bearing on the long term financial sustainability of
the pension scheme.
Inadequate monitoring of equity investments: Persistent gaps were noted in
monitoring of equity investments at RSSB. For majority of the equity investments,
gaps like not obtaining and reviewing regular management accounts/financial
statements, absence of participation in Board meetings of investee companies and
RSSB management inaction on none performing investments continue to exist across
several equity investments where RSSB has invested an amount to the tune of Frw
90,579,398,204. As a result, RSSB has not positioned itself to influence strategic and
policy decisions in a manner that ensures prudent management of shareholder funds.
The failure to earn a return on majority of the investments held is strongly linked to the
aspect of insufficient monitoring.
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FOR THE YEAR ENDED 30 JUNE 2015
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Wasteful and ineligible expenditure at RSSB: A total of Frw 470,332,825 was
incurred by RSSB in wasteful expenditure. This included payment of Frw 224,701,510
for non-existing works, Frw 242,479,347 in fines and penalties for late payment of
land tax, and Frw 3,151,968 paid to staff who were no longer in service.
Gaps in database of beneficiaries: Information maintained by RSSB on medical and
pension registered beneficiaries is inaccurate and unreliable. For instance the affiliate’s
data for pension and medical schemes revealed dates of birth that are after the date of
affiliation. This loosely implies that these members were affiliated into the respective
schemes before they were born. The gaps in the beneficiaries’ database is a significant
weakness that presents planning and administration challenges for the social security
business. The beneficiaries’ database with inaccuracies could also result in ineligible
attribution of benefits.
6. Accounting and financial management issues at University of Rwanda: The higher
institutions of learning merged to form University of Rwanda still face significant
weaknesses in accounting and financial management. All the entities under UR got
qualified audit opinion on both financial statements and compliance aspects. The
accounting issues included:
Long outstanding receivables amounting to Frw 1,616,633,429 for between one (1)
to twenty (20) years;
Unallocated bank deposits/receipts to the tune of Frw 502,502,440 with UR- Huye
campus accounting for 83% of this amount;
Unsupported balances in the books of account including unsupported revenue of
Frw 92,171,600, unsupported expenditure of Frw 1,073,317,235, unsupported debtors
of Frw 246,646,334 and unsupported creditors of Frw 2,233,142,913.
7. Gaps in accounting and financial management at RBC: The financial statements of
RBC were unreliable. There were significant unsupported transactions and balances, a
manifestation of failure of RBC to properly account for funds put at its disposal. There
were unsupported adjustments of Frw 405,505,451, Frw 17,540,371 and Frw 7,809,157
on opening balances of cash and bank, accounts receivable and payable respectively. The
value of stock of medicine counted at 30 June 2015 of Frw 28,595,779,999 was less than
stock value per books of account of Frw 29,309,453,869 by Frw 713,673,870.
Increasing cases of expired drugs at RBC: RBC/MPPD continues to experience high
levels of expiry of drugs due to failure to set and monitor appropriate stock levels. Drugs
and medical consumables worth Frw 1,213,019,238 of RBC/MPDD own stock expired
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between 2010 and 2015. In addition, donor stock under the management of RBC/MPDD
worth Frw 2,672,054,413 expired between 2012 and 2015.
8. Key gaps in RRA revenue collection system: RRA revenue collection system and
revenue reporting system still have significant gaps which need to be addressed in order to
improve RRA capacity to effectively deliver on its mandate. This will require
improvements in the planning and deployment of IT systems; improvement in capacity of
staff to ensure appropriate taxpayer registration and monitoring; revenue collections and
revenue accountability. The total collections reported for the year ended 30 June 2015 are
supported by underlying cashbooks, but the completeness of revenue collections cannot be
confirmed due to gaps identified in the revenue collection processes. These include:
IT systems not integrated to enable appropriate revenue reporting: Core IT
systems used in tax registration, declarations and collections are not integrated to the
financial reporting system to enable proper and accurate reporting of revenue
collections. As a result, there are unexplained differences between revenue collections
in the core IT systems and the amounts in financial statements to the tune of Frw
191,269,172,727;
Revenue collections in core IT systems (SIGTAS/E-TAX and RESW) different from
bank notifications for deposits received on RRA Bank accounts (IMDB notifications)
and actual collections credited on RRA bank statements by Frw 161,965,498,355. No
regular reconciliations are undertaken to identify and address differences arising
between these two control points in the revenue collection cycle.
High proportion of contested audits and inadequate tracking of recoverable tax
amounts: During the year ended 30 June 2015, RRA received 662 appeal cases with
disputed amounts totalling to Frw 71,740,412,559. Some of these cases were settled
amicably, at appeal level while others were settled by courts of law resulting into
waived tax assessments of Frw 12,619,887,476. This is an illustration that RRA is
struggling with capacity to conduct tax audits.
Taxpayers not audited within the five (5) years as prescribed by the tax law: Cases
were noted of taxpayers that had not been audited since their registration date and
others that were audited long time ago. The audit further identified various taxpayers
included on the tax audit plan 2014 -2015 that were not audited during the year. Out of
the 922 planned audits, 314 (34%) were not carried out.
Taxpayers not traceable in taxpayer databases for domestic taxes: There are no
reconciliations of taxpayer databases to ensure that all registered taxpayers are
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captured in respective taxpayer category database. The system does not match
taxpayers in all databases to detect any taxpayers that may be eligible for a tax type but
are not registered for it. 7,154 taxpayers did not appear in the appropriate database.
Taxpayer databases not updated to reflect follow up made for inactive taxpayers:
The audit identified 27,358 taxpayers that have never filed any tax return since their
registration including individuals and companies. There is no evidence to confirm that
RRA monitors registered tax payers to identify those who have not filed any returns
since registration. There is no evidence to show that RRA regularly identifies and
reviews inactive taxpayers to identify if any of them are eligible for tax payment or for
deregistration.
Taxpayers who are VAT registered but do not have Electronic Billing Machines
(EBM): Out of 15,607 registered VAT taxpayers as at 31 January 2016, 5,591
taxpayers (36%) did not have EBMs. The rollout of the EBM machines is still low
with RRA still facing challenges of losing tax revenue due to undeclared sales by tax
payers.
Challenges in recovering tax arrears: RRA has various cases of non-filers and had
tax arrears totalling Frw 129,587,227,782 at 30 June 2015. Out of this amount, Frw
21,633,819,509 has been outstanding for more than four (4) years. Out of this, Frw
3,871,867,832 has been outstanding for more than 10 years.
9. Delays in implementation of Regional Information and Communication Technologies
for excellence project at RDB: Though a construction contract worth Frw
7,399,859,510.78 for the Regional ICT Centre of Excellence-Kigali Campus had been
signed, RDB had not extended electricity and enough water necessary for execution of
works. RDB had also not officially handed over the site to the contractor. Works were still
at site clearing and excavation stage by 31st August 2015 when I conducted a site visit.
Only 6.4% of the earmarked funds had been utilised yet the implementation agreement is
expected to end on 30 June 2016. Failure to adequately monitor and support
implementation of the project will ultimately delay realisation of the envisaged benefits
from the project.
10. Concerns on utilisation of the Document tracking & work flow management
system (DTWMS) at RDB: The Government has invested USD 2,681,112.62 in
acquisition of the Document Tracking and Work-flow Management System (DTWMS).
However, the results of audit revealed that the project is not achieving the intended
objectives mainly due to the fact that RDB implemented the system without a concept
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document elaborating the objectives of the project, the activities to be undertaken, key
performance indicators, stakeholders and their roles and responsibilities. In my opinion,
Government is not realising value for money from funds which have been invested in
acquiring the system, licenses and maintenance cost of Frw 125,817,872 that is being paid
and will be paid continuously. Since DTWMS is one of 59 projects implemented under
NICI III (2011-2015), weaknesses identified in its planning and implementation might be
cross-cutting in other NICI III 58 projects.
11. Concerns on strategic management of privatization activities: The audit of
strategic management of privatization activities revealed that Government is not realising
intended benefits from the privatisation process from some of the companies privatised.
The privatisation process has resulted in Government giving away some companies
without receipt of any payments from the investors and in some instances, 14 investors
have failed to adhere to the investment plans presented at the time of privatisation or failed
to operate the companies as agreed in privatisation agreements. The Government has in
some cases resorted to repossession of the privatised companies but ended up paying a
higher price for repossession than proceeds obtained at privatisation stage. This was
mainly attributed to the following factors:
Fail to conduct legal and financial audit of companies planned for privatization:
Twenty (20) companies were privatized without legal and financial audit to conclude
on the options of privatization, restructuring before privatization, withdrawing and
liquidation;
Lack of documentation to justify the deviation from required privatisation
procedures for some companies: This was noted in the privatisation of six (6)
companies of 6 companies.
Failure to recover proceeds from some companies privatised for a period ranging
from 6 to 10 years: Proceeds from privatisation of three (3) companies amounting to
Frw 335,018,757 have not been collected.
Loss of money during repossession of a company previously privatised: Cases
were identified where Government repossessed privatised companies due to various
reasons, but ended up paying to the investors, amounts significantly higher compared
to the proceeds Government obtained at the time of privatisation. In two (2) cases,
Government paid Frw 449,236,908 in excess of the funds initially received from the
investors.
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Inadequate monitoring of privatized companies: RDB did not obtain quarterly
reports from investors as specified in investment agreements to facilitate monitoring of
the investors for compliance with the terms of the investment.
12. Accountability and sustainability of services at EWSA and successor entities
(REG and WASAC): The audit of EWSA for the year ended 30 June 2014 revealed the
following issues that require attention of management of the successor entities to ensure
sustainability of the energy and water sectors.
Lack of financial accountability for significant operations: Financial statements for
the year ended 30 June 2014 were not reliable due to many errors and omissions. The
value of total assets of Frw 164,134,454,789 reported in financial statements could not
be confirmed because of unsupported balances for fixed assets and omitted assets,
unreconciled/unsupported balances of completed and ongoing water and electricity
projects of Frw 3,265,179,426, missing stock items worth Frw 97,778,986, and
unsupported debtors of Frw 22,828,809,564. There were adjustments of Frw
1,902,480,127 made on opening balances without justifiable documents and reported
sales revenue of Frw 70,034,480,358 could not be reconciled to the billing systems.
High cost of production threatening sustainability of services: Total revenue for the
year ended 30 June 2015 was not sufficient to cover cost of producing water and
electricity. Cost of sales exceeded revenue generated by Frw 15,120,656,416 despite
omitting cost of depreciation for power producing power plants from EWSA financial
statements. This deficit increased to Frw 26,170,363,483 after considering distribution
costs. Sustainability of services currently significantly depends on Government subsidy
to cover some of the operational costs.
Delayed completion of key projects: There were notable delays of over 24 months in
completion of Gishoma Peat project. The power plant is funded by a loan from Bank of
Kigali of USD 30,900,000 (Frw 19,500,000,000) at an interest rate of 15% per annum.
Repayment of this loan was expected to be funded from power sales proceeds from
September 2014. This option did not materialise and EWSA was utilising funds from
other sources to meet interest and loan repayment obligations. Penalties and fines for
delayed loan repayments to the tune of Frw 200,039,274 by December 2014. Further,
Nineteen (19) water projects whose total contract amount was Frw 20,109,813,664 had
several issues including delays ranging between 3 months and over 2 years, contractual
terms were not complied with leading to defects that cast doubt on the sustainability of
the water supply systems. Three (3) of the above 19 projects were relating to
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construction of 10 water tanks valued at valued Frw 1,293,908,104 which were
completed but no water supply connected.
Power plants operating below installed capacity: The total power produced for the
year ended 30 June 2014 was 71,400,135 KW (an average of 8.17MW per hour
throughout the year) for hydropower plants and yet their installed capacity (including
local private hydropower plants) was 191,844,000 KWh (21.96 MW per hour). There
was hence a power supply deficit for the year of 120,443,865 Kwh (equivalent to 13.79
MW per hour representing 63% of the installed capacity. Only one (1) hydro power
plant: Mukungwa I out of the 15 plants operated at more than 50% of the installed
capacity. Seven (7) of them did not generate any electricity during the year. These
included Rugezi, Nshili1, Nyamyotsi I, Nyamyotsi II, Mutobo, Agatobwe and
Nyabahanga.
Lack of accountability for high volume of water and electricity produced: Water
losses at 30 June 2014 stood at 41% (the equivalent of 16,376,094 m3) compared to
target of 25% set by EWSA. The value of unbilled water varied between Frw
3,930,262,560 and Frw 12,118,309,560. A total of 120,523,226 KWH of electricity
(22.74% of electricity produced, equivalent to Frw 16,150,112,284) was not accounted
for in the billings and yet no reconciliation was provided by management to account
for these units produced.
13. Concerns in implementation of the crop intensification program: Weaknesses
continue to exist in the implementation of the crop intensification programme especially
failure to ensure that procured seeds reach the intended beneficiaries/farmers. For example
in seasons 2015A and 2015B, there were significant shortfalls in deliveries compared to
seeds requested by Districts. This was RAB having quantities of seeds it its stores. For
example during the year ended 30 June 2015, RAB purchased 611.2 tons of maize seeds
worth Frw 238,020,380 that had not been issues out its stores by the time of my audit in
April 2016. The inefficiencies in distribution of seeds ultimately affect agricultural
productivity in the country.
14. Continued slow recovery of funds from sale of fertilizers by Post-Harvest and
Storage handling Taskforce: As highlighted in previous annual reports, the pace of
recovery of funds from fertilizer sales is still very low and Post-Harvest Handling and
Storage Taskforce (PHHSTF) is still struggling to recover these balances from distributors
and Agro dealers. Out of the total balance of Frw 11,650,029,461 outstanding as at 1 July
2014, only Frw 305,487,965 (2.6%) was recovered during the year ended 30 June 2015.
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15. Concerns in irrigation and mechanisation: The irrigation system in Nyagatare
District covering 200 ha that cost Frw 2,794,948,262 to establish is currently not in
operation due to vandalism of equipment worth Frw 103,652,682 that has not been
replaced by management of the Taskforce. The opportunity cost of keeping the entire
irrigations system it idle is high in terms of negative impact on the agricultural activities in
the area. Idle stock of equipment worth Frw 95,952,629 and USD 93,213 continues to be
kept at Kabuye workshop. Agricultural machinery and equipment including tractors and
power tillers that broke down have not been repaired.
16. Persistent weaknesses in implementation of one laptop per child program: The
problem of unutilised laptops highlighted in previous Auditor General’s reports has not yet
been resolved by REB. A visit to 20 schools during the audit of REB in March 2016
revealed that laptops are still kept in boxes and cupboards in some schools. These cases
were noted in Groupe Scolaire Kibali and Groupe Scolaire Kageyo schools in Gicumbi
district, Groupe Scolaire Cyambwe in Kirehe district, GS Kabyaza, Centre Scolaire
Bigorwe and Ecole Primaire Bigorwe in Nyabihu District, Groupe Scolaire Kinyinya in
Gasabo District, GS Gahanga I and GS Busanza in Kicukiro.
17. Weaknesses in management of school construction contracts: Various weaknesses
and planning challenges were noted in regard to management of contracts for schools
construction. They included:
Diversion of school construction materials: Cases were noted where materials from
different sites were diverted to infrastructures which were not planned for. These
include 2386 iron sheets, 2500 sacks of cement, 138 ridges, 1460 tubes, and 2600 iron
bars. For the case of Nyagatare District, 631 iron bars were distributed but the District
did not acknowledge of 484 iron bars.
Schools constructed in high risk zones: The physical verification carried out from 8th
to 26th March 2016 identified four schools that were constructed in high risk zones and
are exposed to risks such us landslides and flooding. No protection measures have been
put in place to mitigate these risks.
Uncompleted and abandoned school infrastructure: Site visits conducted from 24th
to 26th February and from 14th to 26th March 2016 identified that construction works at
seven (7) schools had not been completed.
School infrastructure constructed without water drainage system and retaining
walls: Cases were noted where school infrastructure was constructed without water
drainage system and retaining walls. The cases were noted at Nyabihanga secondary
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school at Gikundamvura Sector in Rusizi District and teachers’ hostel at Saint Nicolas
School in Cyanika Sector, Nyamagabe District.
18. Key concerns from management of FARG income generating activities program
(IGA): The programme implementation has faced and still faces the following challenges.
Lack of proper coordination of FARG activities in districts: There is lack of proper
coordination and ownership of the program activities given that FARG considers the
implementation of IGA program to be the responsibility of districts while districts at
the same time consider FARG as owner of the program. Funds were sent to districts
without detailed plans indicating activities and projects to be funded. This resulted in
cases, where some of the funds sent to districts did not have target
projects/beneficiaries and were not utilized as intended.
Income Generating Activities (IGA) program was not prioritized by FARG: The
funds allocated to this program have been decreasing overtime from 13.2% of FARG
budget in 2012 to 0.02 % and 0.04% respectively in 2014 and 2015.
Weaknesses in monitoring project activities and inadequate accountability for
funds disbursed: There is lack of a clear monitoring & evaluation framework to
establish whether the program is making progress and dealing with implementation
challenges timely. Districts do not report to FARG regularly while FARG has also not
been able to undertake adequate follow ups on funded projects. FARG was not able to
provide the status of utilization of funds amounting to Frw 1,766,150,000 representing
cumulative funds disbursed to the districts for the IGA program from 2012 to 2015.
Some monitoring and evaluation reports from districts and FARG covering 987
projects that received Frw 970,148,000 during the period 2012-2013, revealed that 260
projects (26% of the 987 projects) had failed and did not realise intended benefits
from funds to the tune of Frw 257,650,000 disbursed to them.
19. Key concerns in the implementation of City of Kigali Master Plan: A
Performance audit to assess whether the City of Kigali master plan is implemented in
accordance with requirements of master plan revealed that the overall excellence target in
terms of growth and development of the City of Kigali may not be achieved. City of Kigali
did not fully meet the master plan requirements of orderliness and was unable to track and
follow up master plan activities. This can be attributed to some of the following key
issues:
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Lack of proper monitoring and unreliable management information systems: A
case was identified where there was alteration of information in master plan to mislead
decision makers;
Issuing construction permits in wrong zones: Cases were noted where permits were
issued for construction in wrong zones. For example, some permits were issued to
build single residential buildings in protected areas, passive recreational area, and
commercial areas without proper documentation and authorizing altering the zoning
requirements in the master plan;
Change of use without permission of the City of Kigali: There were cases where
residents changed use of land from that previously authorised use per zoning in the
master plan. For example, cases were noted where plot zoned for residential
apartments was changed into commercial units and where a single family residential
house was transformed into a factory, without consulting the City of Kigali;
Ignoring road expansion and reserves: The One Stop Centre approved projects for
construction of residential buildings in the expected road expansion areas. Issuing
permits for new and renovation in roads reserve will cost government huge funds in
terms of expropriation.
Inadequate inspection of the implementation of City of Kigali Master Plan: Kigali
City and Districts did not have a plan or any other guidance of what and when and
where to inspect and ensure consistency during inspections. The Inspection unit does
not have a database of all inspections conducted and number of permits issued; hence
an increased risk of developing substandard projects.
20. Lack of sustainable management system of solid and liquid waste: The audit
identified that Nduba Landfill has not been developed properly to address the
environmental and public health threats. For example, there is no system to receive and
treat the sewage emptied from septic tanks from different parts of the City. The sewage is
deposited into holes dug at Nduba site without proper disposal system and overflows down
from the hill top (where the dumping site is located) into the valleys when it rains. This
poses health hazards.
KEY RECOMMENDATIONS
1. Need for strengthening corporate governance and strategic direction in public
entities: There is need for strong boards of directors especially for Government Business
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Enterprises to provide strategic direction and follow up of activities. The Boards of
Directors should demand timely accountability from the Chief Budget
Managers/Accounting Officers on the utilisation of public funds put at their disposal to
implement Government programmes. The Boards and supervisory authorities should guide
preparation of strategic plans and annual work plans of public entities to ensure that they
are aligned to priorities of each and related sector. This coupled with appropriate follow is
envisaged to reduce cases of stalled Government projects. Targets in performance
contracts signed by Chief Budget Managers should continue to be aligned to the respective
entities and sector priorities.
2. Strengthen supervision and monitoring of Government programmes and
investments: Chief Budget Managers and supervisory authorities need to strengthen the
aspects of monitoring and evaluation of programmes being implemented as part of their
fiduciary duty, to ensure that Government programmes realize their intended objectives
within the stipulated timeframes. Appropriate supervision and monitoring should facilitate
timely corrective measures where necessary. Special attention need to be accorded to
contract management to ensure timeliness of completion of projects and realization of
value for money.
3. Improve quality of accounting records in public entities: There is need for officials in
public entities to review accounting records and adhere to Government accounting policies
and procedures in order to avoid omission of transactions and balances from the books of
account. There is need for public entities to improve on documentation of transactions and
filing of supporting documents to avoid cases of unsupported balances, unsupported
expenditure and unsupported adjustments in the financial statements.
4. Strengthening internal control systems: There is need for strengthening of controls over
the management of fixed assets, cash collections, and bank transactions, to minimize risk
of loss/misappropriation of these assets.
5. Strengthen supervision of activities and implementation of audit recommendations
by Chief Budget Managers: The Chief Budget Managers should ensure full
implementation of audit recommendations as well strengthen supervision of activities they
preside over. This will help in ensuring full compliance with existing laws and regulations
to minimize instances of irregular expenditure and fraudulent activities in public entities.
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In addition, there is need to enforce recovery of funds misused in public entities, including
funds used in fraudulent activities. The Chief Budget Managers need to exercise utmost
due care and be more vigilant in execution of duties to avoid instances of committing
public entities to actions that result into losses.
ACKNOWLEDGEMENT
I would like to acknowledge support from the Government of Rwanda for the continuous
PFM reforms aimed at enhancing public financial management. I also acknowledge
Parliament of the Republic of Rwanda for its oversight mandate. The PAC scrutiny of the
annual Auditor General‘s report that involves public hearing sessions for Accounting Officers
coupled with field visits conducted by PAC members is yielding positive results towards
improving management of public funds.
My appreciation also goes to the Auditees management and staff for the cooperation
accorded to the audit teams during execution of their duties.
I further extend my appreciation to Development Partners for their continued support to
OAG. This has contributed to the increasing OAG capacity to perform its duties.
I wish to express my sincere gratitude to all staff for their commitment, hard work and
passion that has enabled OAG to execute its Constitutional mandate.
Obadiah R. BIRARO
AUDITOR GENERAL
KIGALI, .………………………………. 2016
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EXECUTIVE SUMMARY
According to Article 165 of the Constitution of the Republic of Rwanda of June 2003 revised
in 2015, and Articles 6 and 14 of Law no 79/2013 of 11/09/2013 determining the mission,
organization and functioning of the Office of the Auditor General of State Finances, the
responsibilities of the Office of the Auditor General include the following:
Auditing and reporting on accounts of all public entities, local administrative entities,
public enterprises, parastatal organizations and projects;
Conducting financial and value for money, economy and efficiency audits in respect of
expenditure in all institutions referred to above;
Conducting accountability, management and strategic audits of accounts in the institutions
mentioned above.
Article 166 of the Constitution of the Republic of Rwanda of June 2003 revised in 2015
stipulates that the Auditor General shall submit each year to each Chamber of Parliament,
prior to the commencement of the session devoted to the examination of the budget of the
following year, a complete report on the state financial statements for the previous year.
Accordingly, I submit the Annual audit report of OAG covering audits of financial statements
of public entities for the year ended 30 June 2015 and performance audits conducted during
the period.
The report is presented in five (5) volumes:
Volume I: Executive Summary
Volume II: Report on State Consolidated Financial Statements;
Volume III: Key findings from audit of Local Governments (Districts and City of
Kigali);
Volume IV, PART 1: Key findings from audit of Ministries, and other Central
Administration entities and projects;
Volume IV, PART 2: Key findings from audit of Boards and Government Business
Enterprises; and
Volume V: Key findings from Performance audits
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SECTION 1
REPORT ON OAG ACTIVITIES DURING THE YEAR
1.1 HISTORICAL BACKGROUND
The Office of the Auditor General was established in 1998. It became the SAI of Rwanda in
June 2003. The Office of the Auditor General is vested with legal personality, financial and
administrative autonomy.
Its first annual report issued to Parliament in 2000 had 17 entities audited and first produced
its performance audit report on maternal health care in November 2007. The annual report for
the year ended 30 June 2015 has 159 reports from 157 entities and projects, alongside the
audit report on state consolidated financial statements. The annual report also covers 13
performance/special audit reports.
1.2 MANDATE AND FUNCTIONS OF THE AUDITOR GENERAL
Article 165 of the Constitution of the Republic of Rwanda of 4 June 2003 revised in 2015,
and Articles 6 and 14 of Law no 79/2013 of 11/09/2013 determining the mission,
organization and functioning of the Office of the Auditor General of State Finances (OAG)
require the Auditor General to audit and report to Parliament on the Public Accounts of
Rwanda and of all Public offices including local government organs, public enterprises and
parastatal organizations, privatized state enterprises, joint enterprises in which the State is
participating and government projects.
The responsibilities of the Office of the Auditor General include the following:
Auditing and reporting on accounts of all public entities, local administrative entities,
public enterprises, parastatal organizations and projects;
Conducting financial and value for money, economy and efficiency audits in respect of
expenditure in all institutions referred to above;
Conducting accountability, management and strategic audits of accounts in the institutions
mentioned above.
In addition, Article 166 of the Constitution of the Republic of Rwanda of 4 June 2003 revised
in 2015, stipulates that the Auditor General shall submit each year to each Chamber of
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Parliament, prior to the commencement of the session devoted to the examination of the
budget of the following year, a complete report on the state financial statements for the
previous year. That report must indicate the manner in which the budget was utilized,
unnecessary expenditure which was incurred or expenses which were contrary to the law and
whether there was wasteful expenditure or misappropriation.
1.3 OAG VISION, MISSION AND CORE VALUES
Vision
“To promote an accountable, honest and effective Government administration”.
Mission
“To promote accountability, transparency and best practice in Government operations as a
means to good governance”.
Core Values
The Auditor General and the staff of the Office of the Auditor General, in executing their
responsibilities are committed to live by the office’s core values of:
Integrity: Being upright and honest;
Objectivity: to display impartiality and professional judgment;
Independence: from the audited entity and other outside interest groups;
Accountability: by providing assurance that activities were carried out as intended and
with due regard for fairness, propriety, and good stewardship;
Confidentiality: respect of the confidentiality of information acquired in the course of
work; and
In Public Interest: by making decisions with the public interest in mind.
1.4 OAG STRUCTURE AND STAFFING
The OAG approved organization structure comprises of 150 staff. Current staffing level
stands at 150 staff members comprising of 131 audit staff and 19 non audit staff. In the
financial year 2015-16, OAG experienced high staff turnover. Nine (9) experienced audit
staff members (2014-15: 5) and one (1) non audit staff member (2014-15: 2) left.
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1.5 STRATEGIC PLAN IMPLEMENTATION
OAG has extended its strategic plan from 2015/2016 to 2017/2018, which represents an
extension and continuation of OAG’s performance improvement programme that was
detailed in its Strategic Plan for 2011 – 2016. Recommendations from mid-term review of the
strategic plan and institutional review are being implemented to address OAG changing
needs.
The main building blocks of this extended Strategic Plan remained the previous five pillars,
namely:-
1. Enhancing the independence of OAG;
2. Strengthening institutional capacity in line with its mandate;
3. Building and strengthening professional audit capacity;
4. Strengthening OAG’s capacity to engage stakeholders effectively; and
5. Oversight, coordination, implementation and monitoring of the Strategic Plan.
The main objective of these continued reforms is to further strengthen OAG as an
acknowledged highly competent Supreme Audit Institution, fully able to deliver its mandate
in line with international best practice.
The achievements realized on each pillar are summarized below:
1.5.1 Enhancing the independence of OAG
Following the recommendations from the institutional review, OAG management validated
its proposed new organization structure (with job summary, job profile and budget
implications yet to be shared with strategic stakeholders of MIFOTRA and MINECOFIN).
Consultations are under way with all strategic stakeholders regarding implementation of the
new organization structure.
To further enhance the independence of OAG, a special staff statute was drafted and
submitted to the Office of Prime Minister to be tabled before Cabinet.
1.5.2 Strengthening institutional capacity in line with its mandate
As I reported in my previous report, OAG has embarked on full automation of the audit
processes using teammate audit software. OAG has rolled out Teammate audit software to all
financial and performance audit staff members.
1.5.3 Building and strengthening professional audit capacity
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
30
Under this pillar, the Office achieved the following:
a) Graduate recruitment program (GRP)
In line with the Graduate recruitment program, the Office recruited 35 new audit staff. 21
new auditors were recruited in September 2015 while 14 were recruited in March 2016 due to
the high staff turnover the office experienced. This program attracts the best Rwandan
students in accounting faculties at universities in the country as well as outside the country.
An induction training was conducted for the successful applicants before being deployed for
audits.
b) Professional Training and development
OAG staff members are sponsored for professional courses. A total of 90 OAG students sat
for various professional exams and are now preparing for the June 2016 professional exams,
as shown in table below:
Professional course Number of staff enrolled
ACCA 50 CIPS 1 CPA 37 CISA 1
ICSA 1
90
As a result of office investment in professional training and development of its staff, OAG
has recorded additional qualified audit staff. At present, the office has 19 professional
qualified audit staff.
Besides the accounting professional certification courses, the Office has sponsored its staff in
various trainings including trainings that are organized outside the country as per the annual
training plan.
1.5.4 Strengthening OAG’s capacity to engage stakeholders effectively
During the year, OAG engaged with various stakeholders in order to enhance good
governance and accountability as envisioned by the Vision 2020 and the EDPRS 2. OAG’s
engagement with the stakeholders included:
I. Participation in the Public Finance Management working groups
OAG is one of the strategic PFM institutions in Rwanda. It operates under the component of
External Oversight and Accountability. During the year, OAG participated actively in all the
planned activities by the PFM Secretariat based at MINECOFIN.
II. Engagement in the Accountability fora organized by different stakeholders
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
31
a) Prime Minister’s Office
The Auditor General addressed Prime Minister’s Accountability forum and briefed all Chief
Budget Managers and other participants on the key highlights in the Auditor General’s audit
report for the year ended 30th June 2014. He also briefed participants on strategies of solving
issues raised in Auditor General’s reports as means of preventing misuse of public funds.
b) MINECOFIN
Auditor General addressed the annual workshop for Chief Budget Managers organized by
MINECOFIN on the way of managing the relationship between the Accounting Officers and
Auditor General and the outcome. The aim was to provide a deep understanding to
Accounting Officers that OAG audits are meant to advice in sound management of public
funds and enhance accountability. Fiduciary responsibilities by Accounting Officers and
owning the audit process were emphasized.
The Deputy Auditor General participated in the training of district and provincial hospitals
Accountants organized by MINECOFIN. Key cross cutting issues in hospitals were shared
and how they can be addressed to ensure proper management of public funds.
c) Engagement with the Local Government Authorities Forum
The Auditor General was among the facilitators in the induction of the newly elected local
government leaders organized by the Ministry of Local Government. He addressed
participants on the role of local government authorities in management of public funds.
d) ICPAR
The Auditor General participated in the 4th Annual Seminar organized by ICPAR under the
theme “Accountants in Economic Growth and Development: Professionally Grow Your
Entity and the Nation”. AG requested the professional accountants to add value in their work
and make valuable contribution to the growth of the Rwandan Economy. He reminded them
to benchmark from the international practices.
III. INTOSAI and IDI
INTOSAI is an organization of Supreme Audit Institutions (SAIs) of countries who are
members of the United Nations. IDI is the training arm of the INTOSAI through which
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
32
members of INTOSAI share knowledge, skills and information through training. The Office
of the Auditor General subscribes to and is a permanent member of INTOSAI.
OAG staff participated in the designing of a framework to conduct audits on externally
funded projects in agriculture and food sector using international best practices, specifically
the International Standards for Supreme Audit Institution (ISSAIs). The workshop was
organised by INTOSAI Development Initiative (IDI) in cooperation with International Fund
for Agriculture Development (IFAD) in Zambia and Tanzania.
Lessons learnt workshop is scheduled to be held in Rwanda in the month of February 2017.
OAG Rwanda will be instrumental in organizing this important event.
IV. AFROSAI and AFROSAI-E
AFROSAI is a continent wide organization of Supreme Audit Institutions (SAIs) of Africa
and a Regional African continental member of INTOSAI. Through participating in the
programs and events of AFROSAI, member SAIs share knowledge, information and
experiences in audit of public finances. The Office of the Auditor General subscribes to and is
a member of AFROSAI.
OAG staff attended different trainings and workshops organized by AFROSAI as follows:
Two senior audit staff members participated in a training on review of performance reports
in South Africa. This has helped to enhance the quality of performance audit reports.
Two staff participated in trainings organized by AFROSAI-E in the following areas; IT
and regularity audit.
Two Directors of Audit participated as AFROSAI-E training facilitators in quality
assurance review in SAI Nigeria.
The Director of performance audit participated in the 5th annual meeting of working group
of AFROSAI on environmental audit in Senegal. The meeting was aimed at facilitating
cooperation between SAIs, sharing knowledge and experience among African SAIs in a
bid to build capacity of African SAIs in conducting Environmental auditing. OAG has
benefited a lot from such arrangements hence contributing to continuous improvements in
conducting performance audits.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
33
Audit Manager attended technical updates forum on regularity audit manual in South
Africa. This was meant to share the current changes in the audit environment and their
impact on audit practices.
During the year, Director of performance audit attended a workshop on women leadership
academy organized by SAI Gabon. The aim was to familiarise with the drivers of change to
modern management methods and facilitate within respective SAI, the implementation of
SAI reform projects.
V. Other SAIs
One senior staff is attending 2016 international auditors’ fellowship program at the United
States Government Accountability Office. It is a four 4 months program. Such trainings and
exposure increases knowledge to OAG staff, sharpen their skills and help them build
confidence. This is in line with the strategic plan Pillar 3: Building and strengthening
professional audit capacity.
VI. Audit of East African Community
Rwanda continues to play an important role in the strengthening of the East African
Community organs. OAG is a member of the EAC Audit Commission, a body responsible for
audit of the East African Community Secretariat and its organs. In this audit cycle, the
Auditor General was the Chairperson of the EAC Audit Commission. He was responsible for
coordinating all the audits for the year ended 30 June 2015. The Office committed 4 full time
senior audit staff including a Director for a period of two and half months to join the other
member countries to conduct the audits.
1.6 FINANCIAL MANAGEMENT AT OAG
During the year ended 30th June 2015, OAG submitted, all the required reports to different
government authorities. These include: the monthly financial statements reports, the monthly
fleet management report, monthly procurement execution reports and the annual financial
statements.
The Office executed an annual budget of Frw 4,184,626,681 (2013/14: Frw 3,607,662,404)
composed of Frw 2,228,929,010 of government funding (2013/14: Frw 2,105,345,205) and
Frw 1,955,697,671 (2013/14: Frw 1,502,317,199) as contribution from development
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
34
partners. The budget execution is at a rate of 83.7%. OAG’s financial statements for the year
ended 30th June 2015 were audited by a member firm of ICPAR and received an unqualified
(clean) audit opinion. The audit report together with the annual activity report were submitted
to Parliament.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
35
SECTION 2
AUDIT COVERAGE AND AUDIT RESULTS
2.1 COVERAGE AND RESULTS FOR FINANCIAL AUDITS
2.1.1 AUDIT COVERAGE FOR FINANCIAL AUDITS OF PUBLIC ENTITIES AND
PROJECTS
Indicators 2014/2015 annual report 2013/2014 annual report
Number of public entities and projects audited 157 131
Audit Reports
Number of reports from audits covering entities in
current year consolidated financial statements 124 142
Number of reports from audits of entities whose
expenditure is not part of current year consolidated
financial statements
35 15
Total reports from the audits 159 157
Coverage
Total Government expenditure (Frw) 1,826,772,990,826 1,762,021,652,552
Percentage of 2014/2015 expenditure audited 82% 81%
Number of reports for GBEs and Boards 11 14
Audit of revenue collection cycle
RRA revenue collections (Frw) 862,362,298,122 838,667,155,384
RSSB contributions – Pension Scheme (Frw) 61,141,189,287 55,529,814,582
RSSB contributions – Medical Scheme (Frw) 37,305,626,662 33,119,114,078
The expenditure audited by OAG during the period June 2015 to 30 April 2016 represents
82% of the reported Government expenditure for the year ended 30 June 2015, compared to
81% for the year ended 30 June 2014. The total Government expenditure reported in State
consolidated financial statements for the year ended 30 June 2015 amounted to Frw
1,826,772,990,826 compared to Frw 1,762,021,652,552 for the previous year ended 30 June
2013. This audit coverage of 82% is in line with PFM target for audit of Government
expenditure incurred during the year ended 30 June 2015.
2.1.2 AUDIT OPINIONS ISSUED FOR PUBLIC ENTITIES AND PROJECTS
The annual report for the 2014/2015 period covers 159 reports out of which 157 reports
were completed and signed by 29th April 2016. The analysis of audit opinion issued on
completed audits per cluster is provided in the table below.
Category Audit
reports
completed
by
29/04/2016
Opinion issued on
Financial statements
2014/2015 Annual
Report
Opinion issued on
compliance
2014/2015 Annual Report
Opinion
issued on
regularity
audit -
2013/14
annual report
Unqualified Modified Unqualified Modified Qualified
Ministries 17 16 1 12 5 5
Government 40 34 6 29 11 27
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
36
Category Audit
reports
completed
by
29/04/2016
Opinion issued on
Financial statements
2014/2015 Annual
Report
Opinion issued on
compliance
2014/2015 Annual Report
Opinion
issued on
regularity
audit -
2013/14
annual report
Unqualified Modified Unqualified Modified Qualified
Projects
Local
Governments 31 0 31 0 31 0
Central
Government
entities
58 26 32 20 38 25
GBEs and Boards 11 2 9 0 11 0
Total reports 157 78 79 61 96 57
As a percentage
of reports
completed by
29/4/2016
50% 50% 39% 61% 36%
The number of reports with unqualified audit opinion on financial statements increased from
57 reports (36%) last year to 78 reports (50%) in this annual report out of the 157 reports
issued by 29 April 2016. These reports comprise of 16 reports for Ministries, 34 for
Government projects; 26 reports for Central Government entities, 1 report for a GBE and
1 report for a Board. The increase in number of entities obtaining unqualified audit opinion
on financial statements is an indicator that Government entities are progressively embracing
appropriate financial management practices.
Of the 157 reports issued, 61 reports (39%) got unqualified opinion on compliance aspects.
These included 12 Ministries, 29 Government projects, and 20 Other Central Government
entities.
All Government Business Enterprises and Boards (except RRA Budget Agency and
Rwanda Standards Board) got qualified audit opinion on financial statements like it was in
the previous audits. All the entities in this cluster got qualified opinion on compliance
aspects. The improvements in financial management and compliance with laws and
regulations in Government Business Enterprises and Government Boards remain dismal
despite these entities being in charge of implementing key Government programmes and
managing a significant chunk of Government funds.
There is need for a concerted effort by the Office of the Accountant General to further
support and push Chief Budget Managers of Government Business Enterprises and
Government Boards to embrace the PFM initiatives towards improving financial management
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
37
and accountability practices. Improving financial management and accountability in public
entities should continue to be a key performance indicator for Chief Budget Managers and
prominently included in the performance contracts. This coupled with a focused and efficient
performance assessment process is envisaged to result into the much desired improvements in
financial management of public entities.
2.1.3 QUESTIONED EXPENDITURE ARISING FROM MISMANAGEMENT OR
WASTEFUL EXPENDITURE
Category 2014/2015
annual report
2013/2014
annual report
Frw Frw
Unsupported expenditure 12,785,406,805 6,090,714,400
Partially supported expenditure 3,838,748,979 1,019,076,516
Wasteful expenditure 1,723,841,679 3,600,161,647
Ineligible benefits and allowances 443,736,357 436,853,140
Funds diverted or fraudulently utilised 173,469,076 499,755,126
Questioned Expenditure 18,965,202,896 11,646,560,829
A total of Frw 18,965,202,896 was incurred by Government entities on Questioned
expenditure compared to Frw 11,646,560,829 in the last annual report. Entities incurred
expenditure without sufficient support documents required to justify utilisation of public
funds while in other cases, funds were utilised on wasteful expenditure and unauthorised
allowances. Entities where majority of the questioned expenditure was noted include EWSA,
RBC, Gatsibo District, UR (former KIST), Nyarugenge, Nyabihu District, MINISANTE and
District Hospitals.
For fraud cases reported in previous years since 2010/2011 financial year, Frw 1,553,750,866
had not been recovered as at the time of the current audits, as summarized below:
Amount of fraudulent
payments reported
previously (Frw)
Amount not
recovered (Frw)
Funds withdrawn using forged documents 441,182,064 383,911,803
Funds used for personal gain and not accounted for 222,851,807 215,456,637
Funds and materials diverted and not reaching intended
beneficiaries 963,954,768 954,382,426
Total 1,627,988,639 1,553,750,866
This includes Frw 346,516,115 at REB, Frw 294,896,986 at RNP, Frw 117,337,781 at
LODA (former RLDSF), Frw 84,761,719 at RRA, and Frw 115,500,000 at EWSA.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
38
Stolen assets reported in last annual report
For cases of stolen assets valued at Frw 343,428,908 identified during the previous year, Frw
319,907,041 had not been recovered at the time of the current audits. This amount includes
medicine worth Frw 172,723,533 and wooden boxes worth Frw 25,010,100 stolen at RBC.
There is need for Chief Budget Managers to be more vigilant in management of public funds
at their disposal to ensure they are used only for the intended purpose.
2.2 COVERAGE AND RESULTS FOR PEFORMANCE AND
SPECIAL AUDITS
Performance audit conducted Sector covered
1 Performance audit on the implementation of City of Kigali
Master Plan
Urban Development
2 Performance audit on management of income generating
activities program OF FARG
Social Protection
3 Performance audit on Government revenues from Extractive
Industries
Finance
4 Performance audit on Municipal solid and liquid (sludge
from septic tanks) waste management in City of Kigali
Environment
5 Management of contracts: Case of schools construction Education
6 Procurement and management of drugs and medical supplies
and its impact on health care at University Teaching
Hospital-Kigali (UTH-K/CHUK)
Health
7 Review of implementation of Healthy Futures project at
Rwanda Biomedical Center
Health
8 Performance audit on strategic management of privatization
activities
Finance
9 Audit of revenue collection system at Rwanda Revenue
Authority
Finance
10 Performance audit on utilization of ICT tools - Case of
document tracking & work flow management system
ICT
11 Integrated payroll and personnel information system (IPPIS)
Operations
ICT/Public Service
12 Information Systems/Technology audit at RSSB ICT/Social Security
13 Information Systems/Technology audit at RRA ICT/Finance
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
39
SECTION 3
TRACKING IMPLEMENTATION OF AUDITOR
GENERAL’s AUDIT RECOMMENDATIONS
3.1 STATUS OF IMPLEMENTATION OF PREVIOUS AUDIT
RECOMMENDATIONS
Total
recommendations
made in prior year
audits
Fully
implemented
Partially
implemented
Not
implemented
%ge not fully
implemented-
2014/2015
annual report
%ge not fully
implemented-
2013/2014
annual report
Ministries 108 75 22 11 31% 46%
Government
Projects 155 110 23 22 29% 28%
Local
Governments 887 466 177 244 47% 46%
Central
Government
entities
415 209 59 147 50% 33%
Boards and
Government
Business
enterprises
678 275 144 259 59% 64%
Total 2,243 1,135 425 683 49% 42%
During every audit, the OAG makes an assessment of status of implementation of previous
audit recommendations for each public entity in accordance with Article 69 of Organic Law
No. 12/2013 of 12/09/2013 on State Finances and Property that require each Chief Budget
Manager and Directors of public bodies to implement recommendations of the Auditor
General. The audit recommendations are aimed at improving the effective management of
finances under their control. The results of the assessments are discussed to seek further
management commitment to address the issues raised.
Overall, public entities did not implement 49% of the audit recommendations. Government
Boards and Business Enterprises continue to perform at the least in implementation of
Auditor General’s recommendations having not implemented 59% of the previous audit
recommendations. Among the worst performers in this cluster is RSSB that did not
implement 77% of recommendations; EWSA Utility that did not implement 81% of the
recommendations; EWSA Development Unit that did not implement 65% of the
recommendations; and REB that did not implement 64% of the audit recommendations.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
40
SECTION 4
KEY FINDINGS IDENTIFIED IN PUBLIC FINANCIAL
MANAGEMENT SYSTEM
4.1 GAPS IN ACCOUNTING AND FINANCIAL REPORTING
SYSTEMS
4.1.1 ERRORS AND OMISSIONS IN FINANCIAL STATEMENTS OF BUDGET
AGENCIES
There are still cases of accounting errors and omissions identified in audits of financial
statements of public entities as highlighted in examples below.
Omitted creditors balances of Frw 15,569,062,467
Omitted receivables of Frw 4,785,136,358
Fifteen (15) omitted bank accounts with debit balances of Frw 58,606,283 and credit
balances of Frw 2,212,425,929
Unsupported adjustments made in the books of account, total credits of Frw
8,524,528,916 and debits of Frw 1,219,607,960
Unsupported creditors of Frw 29,889,751,578
Unsupported debtors of Frw 3,844,269,244
Debtors and creditors balances amounting to Frw 27,335,403,764 and Frw
12,449,917,427 respectively without any detailed breakdown
Long outstanding debtors of Frw 17,743,210,882 and
The significant errors and omissions identified during audits of budget agencies are indicators
of inadequate review of monthly financial statements submitted by budget agencies to
MINECOFIN. There is need for budget agencies to ensure that financial statements are
properly reviewed and any errors and omissions corrected before they are submitted to
MINECOFIN. The Accountant General’s office should provide necessary support and
training to staff in budget agencies to improve the reliability of monthly financial statements.
The extent of reviews performed on monthly financial statements submitted by Budget
agencies should be intensified to minimise errors and omissions in the annual State
Consolidated financial statements.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
41
4.1.2 INAPPROPRIATE FINANCIAL REPORTING FRAMEWORK ADOPTED BY
PUBLIC ENTITIES
Some Government entities continue to apply the modified cash basis of accounting and yet
the nature of their activities requires them to apply accruals basis of accounting. This implies
that their current financial statements do not reflect the true picture of the financial
performance and position. Significant transactions and balances are omitted from financial
statements prepared on the basis of modified cash basis of accounting thereby discounting
their usability. Entities where the adopted basis of accounting is not appropriate include:
Rwanda Biomedical Center/MPPD (Former CAMERWA) where the financial statements
prepared by MPPD do not disclose significant balances for fixed assets of Frw
3,591,378,629 and inventory of Frw 29,159,477,679. Furthermore, while the financial
statements of MPPD are reported on a modified cash basis of accounting, the underlying
books of account are maintained on accrual basis of accounting. This necessitates making
various adjustments to derive figures to be consolidated with the rest of RBC. This
process distorts and discounts the usefulness of the financial information disclosed in the
financial statements.
Rwanda Development Board (RDB) where the financial statements prepared under the
modified cash basis of accounting omitted key financial statement captions including
investments worth Frw 4,273,710,000, preference redeemable Shares in Olleh Network
Rwanda worth Frw 79,010,726,592 and Africa Olleh Service worth Frw 5,090,280,000,
and fixed assets worth Frw 11,135,796,597 acquired and expensed during the year.
Omission of significant balances from the books of account and financial statements
discounts the usefulness of the reported information. Assets not tracked in the books of
account are also liable to misappropriation.
The above entities in particular need to adopt the accruals basis of accounting that will result
in according appropriate accounting treatment to the nature of their activities and more
relevant and informative financial statements. The accruals basis of accounting will also
improve the tracking and accountability for the assets when recorded in the books of account
and ultimately reported in the financial statements.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
42
4.2 IDLE ASSETS, DELAYED CONTRACTS AND ABANDONED
WORKS AND PROJECTS
4.2.1 WEAKNESSES IN CONTRACT MANAGEMENT, DELAYED PROJECTS
AND ABANDONED WORKS
4.2.1.1 Status of completion of delayed contracts reported in previous annual report
Delayed contracts Abandoned contracts Total contracts
No. Value (Frw) No. Value (Frw) No. Value (Frw)
Number of contracts which had
delayed or been abandoned per last
year annual report (no final
handover report or abandoned)
63 122,683,951,602 14 3,368,946,434 77 126,052,898,036
Number of contracts subsequently
completed and final hand over
made to Government entities (after
the delay)
12 2,538,534,339 4 1,043,182,136 16 3,581,716,475
Number of contracts with
provisional handover but no final
handover to Government entities**
37 81,769,961,483 0 37 81,769,961,483
Number of contracts which are not
yet completed since my last annual
report (no provisional handover)
12 35,531,130,300 0 12 35,531,130,300
Number of delayed contracts which
were subsequently abandoned or
not subsequently resumed
2 2,844,325,480 5 1,335,765,012 7 4,180,090,492
Number of contracts which were
abandoned and management
subsequently contracted new
contractors but not provisionally
handed over
0 0 5 989,999,286 5 989,999,286
%age of contracts where final
handover has been made 19% 2% 29% 31% 21% 3%
%age of contracts with provisional
handover but no final handover 59% 67% 0% 0% 48% 65%
%age of contracts where no
provisional handover has been
made
19% 29% 0% 0% 16% 28%
%age of contracts subsequently
abandoned/not resumed 3% 2% 36% 40% 9% 3%
%age of contracts which were
abandoned and management
subsequently contracted new
contractors but no provisionally
handed over
0% 0% 36% 29% 6% 1%
As reported in the last annual report, there were 77 contracts involving Frw
126,052,898,036 which had been delayed or abandoned by contractors. The status of these
contracts at the time of current audits is as follows:
Sixteen (16) contracts (21%) involving Frw 3,581,716,475 were completed and final
handover done;
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
43
Thirty seven (37) contracts (48%) involving Frw 81,769,961,483 had progressed and
provisional handover had been done;
Twenty four (24) contracts (31%) involving Frw 40,701,220,078 had not been completed
as at the time of the current audits. These outstanding contracts are analysed below:
a) Twelve (12) contracts involving Frw 35,531,130,300 had not been finalised since the
last audit but works are still at different stages of contract execution. See table below:
Institution Nature of works/ services Contract
Amount (Frw)
1 EWSA
Execution of contract for supply of water to Bumbogo sector
on behalf of Gasabo District 938,746,541
2
EWSA
Completion of works relating to a concrete storage tank at
Rebero and a pipeline from Rebero to Nyarurama on Behalf
of Ruhango District
416,242,874
3 EWSA Delays in completion of Gishoma Peat to Power Plant 18,759,453,980
4 SDP/WDA
Construction and rehabilitation works in Ecole Secondaire
Technique de Busogo 1,423,738,720
5 Rusizi District
Supply and installation of equipment for public lighting in
Rusizi district 636,566,000
6 Rusizi District
construction works of administrative and consultation blocks
at Nyakabuye Health Centre 102,565,107
7 Rusizi District
Construction works of administrative block, laundry and
fence at Nyakarenzo Health Centre. 83,050,636
8
RBA/ORINFOR
Modification works of OBK building and the supply,
installation and commissioning of radio and television
studios (Euro 12,160056)
10,563,468,530
9
RHA/Rubavu
Project - UN
HABITAT
Construction of 20 houses for displaced people in Rubavu
district 48,731,000
10 MINISANTE
Construction works of Maternity block in Nyagatare District
Hospital 1,338,077,182
11 Huye District
Construction of 40 houses for Genocide Survivors in
Mukura Sector 169,717,080
12 Bugesera District Construction works of the new boarding of Bugesera district 1,050,772,650
Sub-total 35,531,130,300
b) Seven (7) contracts involving Frw 4,180,090,492 were subsequently abandoned or not
resumed by contractors. These comprise two (2) contracts previously reported as delayed
had subsequently been abandoned by contractors and five (5) contracts previously
abandoned and works had not resumed by the time of current audits. See table below:
Institution Nature of works/ services
Contract
Amount
(Frw)
Previously abandoned and works not resumed
1 WDA Construction of two floor administrative building; 467,239,340
2 WDA Construction of workshop hall having 385,073,638
3 Rusizi District
construction of roads in cobblestone: Road KABEZA -
GIHUNDWE Sector office and Road CYAPA – Primary
School GIHUNDWE B.
423,620,884
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
44
Institution Nature of works/ services
Contract
Amount
(Frw)
4 Rusizi District construction of latrines and laundry block at GIHUNDWE
health centre in RUSIZI District 34,831,150
5 Rusizi District construction of park for trucks at KADASHYA 25,000,000
Abandoned after the previous audits where they had been
reported as delayed
6 Bugesera
District
Completion works for constructing "digue routiere" crossing
marshland in Migina and 2 connecting roads 700,489,300
7 WDA
Construction of Classroom and External works of GIP;
construction of Administration building, Workshops
Kitchen Refectory and Latrine at Gishari Integrated
Polytechnic Training School
2,143,836,180
4,180,090,492
c) Five (5) contracts involving Frw 989,999,286 resumed contract execution after
management engaged new contractors. Five (5) contracts previously abandoned at LWH,
REB, Bugesera, Gakenke and Karongi Districts had resumed. See table below:
Institution Audit
period Nature of works/ services Contractor
Contract
Amount
(Frw)
Previously abandoned
1 LWH 01/07/2013-
30/06/2014
Construction of two medium
sized storage, one small
sized storage, four maize
drying areas and one banana
collection centre
STANDARD
CONSTRUCTION
& SUPPLY Ltd
358,626,158
2 REB 01/07/2013-
30/06/2014
Construction of laboratory
at Groupe Scolaire Gahini REAL VISION 153,370,948
3 Bugesera
District
01/07/2013-
30/06/2014
Construction of houses for
vulnerable genocide
survivors
DIDICOFU ltd
enterprises 65,031,500
4 Gakenke
District
01/07/2013-
30/06/2014 Construction of Minazi
Health Center Smark partners 288,697,780
5 Karongi
District
01/07/2013-
30/06/2014 Construction of Youth
Peace Center
ABICO NET
FAIR Ltd 124,272,900
Total
989,999,286
There is need for Chief Budget Managers to intensify efforts dedicated to project
conceptualisation, procurement and monitoring of Government programmes to ensure
realisation of intended objectives.
4.2.1.2 New cases of delayed contracts, projects and abandoned works
The challenges of contract management in public entities are still persistent. Twenty four (24)
contracts (31% of delayed contracts in previous report) involving Frw 40,701,220,078 had
not been completed as at the time of the current audits. There was a total of 58 contracts
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
45
worth Frw 28,121,781,561 of delayed contracts identified during the year and 12 contracts
worth Frw 4,370,563,354 which were abandoned as shown in table below:
Number Amount (Frw)
Number
Amount
(Frw) Number Amount (Frw)
Districts 38 6,785,596,126 10 3,020,545,717 48 9,806,141,843
GBEs/Boards 7 12,350,009,211 1 651,757,018 8 13,001,766,229
Ministries 5 926,983,762 5 926,983,762
Projects 4 6,635,909,714 4 6,635,909,714
UR 4 1,423,282,748 1 698,260,619 5 2,121,543,367
2014/2015 58 28,121,781,561 12 4,370,563,354 70 32,492,344,915
2013/2014 63 122,683,951,602 14 3,368,946,434 77 126,052,898,036
For the abandoned works, a total of Frw 2,622,446,048 had been paid to the contractors by
the time of abandoning works.
These mainly comprised of poorly managed contracts in Districts (66%) and Government
Business Enterprises and Boards (12%). In terms of value, significant delays were noted with
water contracts at EWSA which had not been completed after significant periods of delay and
at RAB, where there were delays in Construction of RAB central laboratory (phase I) at
Rubirizi in Kicukiro District.
Districts
In the case of districts, 38 contracts worth Frw 6,785,596,126 were delayed and another ten
(10) contracts worth Frw 3,020,545,717 were abandoned. See table below.
Number Amount
(Frw) Number
Amount
(Frw) Number Amount (Frw)
Bugesera 1 25,569,885 1 25,569,885
City of Kigali 2 478,011,413 2 478,011,413
Gakenke District 1 148,654,894 1 148,654,894
Gicumbi District 2 809,499,251 1 8,732,000 3 818,231,251
Gisagara District 1 6,770,000 1 547,437,410 2 554,207,410
Huye District 2 812,098,339 2 812,098,339
Kicukiro District 2 552,642,526 2 552,642,526
Kirehe District 1 371,969,052 1 371,969,052
Muhanga District 1 782,502,370 1 239,858,625 2 1,022,360,995
Nyabihu District 1 325,712,393 2 107,835,372 3 433,547,765
Nyamasheke
District 1 238,276,074 1 72,962,400 2 311,238,474
Nyanza District 5 823,006,984 5 823,006,984
Nyaruguru District 5 418,332,030 1 29,510,802 6 447,842,832
Rubavu District 1 38,365,600 1 38,365,600
Ruhango District 1 68,254,905 1 68,254,905
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
46
Number Amount
(Frw) Number
Amount
(Frw) Number Amount (Frw)
Rusizi District 1 152,559,955 1 152,559,955
Rutsiro District 9 601,457,615 2 1,226,149,788 11 1,827,607,403
Rwamagana
District 1 131,912,840 1 131,912,840
Nyamagabe District 1 788,059,320 1 788,059,320
Districts 38 6,785,596,126 10 3,020,545,717 48 9,806,141,843
4.2.2 CONCERNS OVER PERSISTENT CASES OF IDLE ASSETS AND FAILED
PROJECTS
The current audits identified assets purchased/established by Government entities at Frw
7,920,352,319 that were idle. Cases were mainly noted at EWSA, RSSB, MINISANTE, REB
and Rusizi District.
Cases of failed projects included the following:
Cassava factory involving Frw 768,070,428 for Ngororero district not put to use:
Ngororero District funded the construction of cassava plant in Muhororo Sector. The
overall project cost was Frw 768,070,428 out of which Frw 718,360,428 had been paid
for works and equipment. The project has stalled due to procurement of inappropriate
equipment worth Frw 248,550,000 out of which Frw 198,840,000 had been paid to the
supplier. RSB in their inspection carried out on 2 April 2015 noted that the equipment
does not meet food hygiene requirements and has to be replaced. No value for money has
been derived from the factory.
Absence of plan to utilise the water installation at the failed Kalisimbi Geothermal
exploration project: EWSA installed a water supply system from Karago Lake to
Kalisimbi drilling site at a cost of USD 4,387,293 (Frw 2,741,462,984) to facilitate
Geothermal drilling activities at Kalisimbi. However, management has not devised
alternative use for the water supply following failure of the project.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
47
SECTION 5
KEY FINDINGS FROM AUDIT OF GOVERNMENT
BUSINESS ENTERPRISES AND BOARDS
5.1 RWANDA SOCIAL SECURITY BOARD (RSSB)
5.1.1 INAPPROPRIATE ACCOUNTING AND BOOK KEEPING ARRANGEMENT
FOR DIFFERENT FUNDS UNDER RSSB
Following merging of former Rwanda Medical Insurance (RAMA) and Social Security Fund
of Rwanda (CSR) into RSSB, management elected to perform the accounting and financial
reporting function in one set of books of account for both schemes. This resulted in
misallocation of some transactions and balances across schemes and arbitrary allocation of
operating expenditure across the schemes. For instance in apportioning of operating
expenses, a 50-50 basis between pension and medical units was applied up to 30 June 2015.
In the following year ending 30 June 2016, after transfer of Mutuelle de sante into RSSB;
operating expenses are now shared at 40% for Mutuelle de sante while the remaining 60% is
shared equally between the medical and pension schemes. This arbitrary apportionment of
operating expenses does not reflect the level of consumption of the shared services by the
three schemes.
Maintenance of one set of books of account for the current three schemes under RSSB and
arbitrary apportioning of operating costs is likely to result in using funds of one scheme in
meeting obligations of the other. Overtime funds of one scheme could as a result be eroded to
support activities of the other.
Given that the medical scheme, pension scheme and Mutuelle de santé have separate and
distinct membership, differently structured benefit outflows and statutory obligations, and
different long term sustainability risks, it is paramount that separate books of account are
maintained for each scheme to distinctively identify respective assets and liabilities.
For purposes of reporting the financial performance and position of RSSB as a whole,
consolidation should be done at the entity level through aggregating separate scheme
financial statements.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
48
5.1.2 UNRELIABLE ACCOUNTING RECORDS AND FINANCIAL STATEMENTS
The RSSB financial statements contain inaccuracies and are therefore not reliable for proper
decision making. These mainly arise from:
Errors and inappropriate basis applied in valuing unquoted/unlisted equity investments
with questionable fair value gains of Frw 9,583,023,901;
Overstatement of fair value of quoted/listed equity investments by Frw 2,101,452,266;
Absence of valuation of investment properties and continued reporting of outdated values
of investment properties established in June 2012. The questioned value of investment
properties reported at 30 June 2015 was 96,147,823,036;
Weaknesses in tracking and accounting for mortgage loans relating to houses located at
Gacuriro 2020 Estate. There were cases of borrowers that still had balances of Frw
171,063,283 in the books of account as at 30 June 2015 yet they had fully paid their
balances and were issued with clearance certificates by RSSB;
Unallocated mortgage repayments amounting to Frw 490,850,793 reported under
liabilities in the financial statements; and
Unsupported creditors of Frw 950,595,239, and creditors with credit balance of Frw
4,813,735,245 and debit balance of Frw 253,088,772 with no individual/itemised listing
of creditors.
These errors and omissions misstate the reported financial position of RSSB.
5.1.3 EROSION OF INVESTMENT VALUE THREATENING SUSTAINABILITY
OF PENSION FUND
In the previous annual report, there were sixteen (16) equity investments where RSSB had
invested a total amount of Frw 65,305,671,206 that had not paid any dividend from the time
of initial acquisition or establishment. During the year ended 30 June 2015, these same
investments still did not generate any return to RSSB. RSSB further injected an amount of
Frw 16,660,891,275 to three of the investments in question thereby increasing total
investment in non-performing ventures to Frw 81,966,562,481.
A common attribute to the sixteen (16) equity investments above is that they were acquired
without proper analysis by the investment committee and review and approval by the Board
of Directors.
Continuing to hold investments where no return is earned has a negative bearing on the long
term financial sustainability of the pension and medical schemes. Making additional
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
49
payments into such investments with no documented analysis pertaining to the earnings
potential of the equity investments in question and any measures management has undertaken
to make the ventures profitable further exposes the funding schemes to possible losses.
5.1.4 INADEQUATE MONITORING OF INVESTMENTS
The audit of RSSB for the year ended 30 June 2015 noted persistent gaps in monitoring of
equity investments. Monitoring gaps like not obtaining and reviewing regular management
accounts/financial statements, absence of participation in Board meetings of investee
companies and RSSB management inaction on none performing investments continue to exist
across several equity investments where RSSB has invested an amount to the tune of Frw
90,579,398,204. As a result, RSSB has not positioned itself to influence strategic and policy
decisions in a manner that ensures prudent management of shareholder funds. The failure to
earn a return on majority of the investments held is strongly linked to the aspect of
insufficient monitoring.
5.1.5 WASTEFUL AND INELIGIBLE EXPENDITURE IN RSSB
On 13th March 2013, RSSB entered into an agreement for Frw 1,388,759,846 with DNA
Design Associates to design and build interiors fit out for RSSB Headquarter building. The
audit identified that payments of Frw 910,454,494 were made to DNA Design Associates
before any work was done. Subsequent to the payments, the contract was cancelled but RSSB
was only able to recover Frw 685,752,984 from DNA Design Associates out of Frw
910,454,494 paid, leaving a balance of Frw 224,701,510 unrecovered. The unrecovered
amount was accounted for in the books of account as an addition to the cost of the RSSB
headquarter building, a practice that is fraudulent.
RSSB incurred wasteful expenditure of Frw 242,479,347 on fines and penalties on late
payment of land tax that was payable from 01/08/2010 up to 01/01/2013. An amount of Frw
3,151,968 was paid to staff who were no longer in service.
This resulted into wasteful expenditure to RSSB that could have been avoided if reasonable
care had been taken.
Total wasteful expenditure amounted to Frw 470,332,825 as shown in the table below.
Particulars Amount in Frw
Payments made to DNA without work done 224,701,510
Penalties on late payment and fines respectively in relation to land tax. 242,479,347
Salaries paid to staff who were no longer in service 3,151,968
Total 470,332,825
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
50
5.1.6 GAPS IN DATABASE OF BENEFICIARIES
Information maintained by RSSB on medical and pension registered beneficiaries is
inaccurate and unreliable. For instance the affiliate’s data for pension and medical schemes
revealed dates of birth that are after the date of affiliation. This loosely implies that these
members were affiliated into the respective schemes before they were born. The gaps in the
beneficiaries’ database is a significant weakness that presents planning and administration
challenges for the social security business. The beneficiaries’ database with inaccuracies
could also result in ineligible attribution of benefits.
5.2 RWANDA REVENUE AUTHORITY (RRA)
5.2.1 GAPS IN REVENUE COLLECTION AND REPORTING SYSTEMS
5.2.1.1 IT systems not integrated to enable appropriate revenue reporting
Core IT systems used in tax registration, declarations and collections are not integrated to
the financial reporting system to enable proper and accurate reporting of revenue
collections. As a result, there are unexplained differences between revenue collections in
the core IT systems and the amounts in financial statements to the tune of Frw
191,269,172,727.
Revenue collections in core IT systems (SIGTAS/E-TAX and RESW) different from bank
notifications for deposits received on RRA Bank accounts (IMDB notifications) and
actual collections credited on RRA bank statements by Frw 161,965,498,355. No regular
reconciliations are undertaken to identify and address differences arising between these
two control points in the revenue collection cycle.
The above differences are indicators that collections reported in the core IT systems as well
as the financial statements are not accurate.
5.2.2 GAPS IN RRA TAX AUDITS
5.2.2.1 High proportion of contested audits and inadequate tracking of recoverable tax
amounts
During the year ended 30 June 2015, RRA received 662 appeal cases with disputed amounts
totalling to Frw 71,740,412,559. Some of these cases were settled amicably, at appeal level
while others were settled by courts of law resulting into waived tax assessments of Frw
12,619,887,476. This is an illustration that RRA is struggling with capacity to conduct tax
audits.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
51
5.2.2.2 Taxpayers not audited within the five (5) years as prescribed by the tax law
Cases were noted of taxpayers that had not been audited since their registration date and
others that were audited long time ago. The audit further identified various taxpayers
included on the tax audit plan 2014 -2015 that were not audited during the year. Out of the
922 planned audits, 314 (34%) were not carried out.
Further, RRA does not have a system in place that enables them to track large, small and
medium taxpayers audited and for which period each taxpayer has been audited. The failure
to audit the taxpayers within the regulatory period denied Government revenue.
5.2.3 GAPS IN REGISTRY AND FOLLOW UP OF TAXPAYERS
5.2.3.1 Taxpayers not traceable in taxpayer databases for domestic taxes
The audit of RRA identified that there are no reconciliations of taxpayer databases to ensure
that all registered taxpayers are captured in respective taxpayer category database. The
system does not match taxpayers in all databases to detect any taxpayers that may be eligible
for a tax type but are not registered for it. 7,154 taxpayers did not appear in the appropriate
database. See summary table below:
Categories of Taxpayers
Number not traced in
relevant taxpayer
databases
Taxpayers registered for Excise duty but not registered for PIT or CIT 22
Taxpayers owning EBMs could not be traced in the database of RRA registered
VAT taxpayers. This is an illustration that the database of VAT taxpayers is not
updated and RRA is losing out tax revenue from such taxpayers
398
PIT/CIT taxpayers with turnover above Frw 20,000,000 are not registered as
VAT taxpayers 25
Taxpayers registered for VAT but are not registered as PIT or CIT taxpayers 1,413
Taxpayers registered for Pay As You Earn (PAYE) but not registered as PIT or
CIT 2,101
Companies registered for pension contributions in RSSB are not registered for
PAYE yet they are registered for other taxes in Rwanda Revenue Authority. 3,195
Total 7,154
The database for taxpayers is incomplete leaving some taxpayers outside RRA follow up and
loss of uncollected taxes.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
52
5.2.3.2 Taxpayer databases not updated to reflect follow up made for inactive taxpayers
The audit of RRA noted 27,358 taxpayers who have never filed any tax return since their
registration including individuals and companies. However, there is no evidence to confirm
that RRA monitors registered tax payers to identify those who have not filed any returns
since registration. There is no evidence to show that RRA regularly identifies and reviews
inactive taxpayers to identify if any of them are eligible for tax payment or for deregistration.
The lack of follow up of inactive taxpayers implies that RRA is not collecting any tax
revenue from them.
5.2.3.3 Taxpayers who are VAT registered but do not have Electronic Billing Machines
(EBM)
Out of 15,607 registered VAT taxpayers as at 31 January 2016, 5,591 taxpayers (36%) do not
have EBMs. The rollout of the EBM machines is still low with RRA still facing challenges of
losing tax revenue due to undeclared sales by tax payers. There is need to intensify the
enforcement efforts to ensure that all tax payers registered for VAT acquire and use EBM
machines.
5.2.4 CHALLENGES IN RECOVERING TAX ARREARS
RRA has various cases of non-filers and had tax arrears totalling Frw 129,587,227,782 at 30
June 2015. Out of this amount, Frw 21,633,819,509 has been outstanding for more than four
(4) years. Out of this, Frw 3,871,867,832 has been outstanding for more than 10 years as
shown below.
Period tax remained unpaid SMTO LTO Total
Frw Frw Frw
4-9 years 1,732,117,996 16,029,833,681 17,761,951,677
10 years + 364,719,359 3,507,148,473 3,871,867,832
Total 2,096,837,355 19,536,982,154 21,633,819,509
There was no evidence provided to confirm subsequent recovery of the above tax arrears
which that had not yet reached 10 years.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
53
5.3 ENERGY, WATER AND SANITATION AUTHORITY
(EWSA)
The audit covered the year ended 30 June 2014 and was the last audit of EWSA following
promulgation of Law no. 97/2013 of 30/01/2014 under which EWSA was restructured to
form two new entities of Rwanda Energy Group Limited (REG Ltd) and Water & Sanitation
Corporation Ltd (WASAC Ltd) in line with the Government of Rwanda reforms in the energy
and water sector. Addressing the issues highlighted by the audit is the responsibility of
management of the successor entities. Key issues included the following.
5.3.1 LACK OF PROPER ACCOUNTABILITY FOR EWSA OPERATIONS
Financial statements for the year ended 30 June 2014 were not reliable due to many errors
and omissions. For example, some power plants were omitted from financial statements and
majority of debtors and liabilities not properly supported.
At EWSA, the value of total assets of Frw 164,134,454,789 reported in financial
statements could not be confirmed because of unsupported balances for fixed assets and
omitted assets;
Missing stock items worth Frw 97,778,986 and idle stock of materials worth Frw
1,620,926,869;
Unsupported debtors of Frw 21,618,423,929;
Unsupported creditors of Frw 15,077,617,513;
Omitted loans of Frw 15,104,435,999 and related interest of Frw 1,417,573,280; and
Unsupported adjustments on opening balances of Frw 1,902,480,127.
5.3.2 HIGH COST OF PRODUCTION THREATENING SUSTAINABILITY OF
SERVICES
Total revenue for the year ended 30 June 2014 was not sufficient to cover cost of producing
water and electricity. Cost of sales exceeded revenue generated by Frw 15,120,656,416
despite omitting cost of depreciation for power producing power plants from EWSA financial
statements. This deficit increased to Frw 26,170,363,483 after considering distribution costs
as shown below.
Sales revenue Frw
Sales of water 12,842,564,352
Sales of electricity 57,191,916,006
70,034,480,358
Cost of sales
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
54
Cost of sales 70,657,541,471
Depreciation for generation, transmission and distribution assets 13,602,705,416
Distribution 11,944,596,954
97,099,733,728
Excess costs (26,170,363,483)
Fifty nine percent (59%) of the above cost (Frw 56,650,978,583) was attributed to the cost of
fuel and service charge for the thermal power plants operated during the year.
It should be noted that EWSA received Government subsidy to meet the cost of fuel used
in thermal power plants operated by AGGREKO. A total of Frw 25,946,662,327 was
incurred by Government on behalf of EWSA during the year. This subsidy represented
37% of cost of sales for the year under review. This implies that without the subsidy,
EWSA or successor entities would not be unable to offer the required service to the
public on a sustainable basis.
The cost of thermal Power was estimated at Frw 155.35 per KWh (excluding taxes)
which is higher than the selling price of electricity of Frw 134 per KWh (selling rate
used for industries during the year ended 30 June 2014 leading to a loss per KWh of Frw
21.35 (excluding taxes). The total loss on power procured from Aggreko amounted to
Frw 3,314,982,214 (excluding taxes) considering that Aggreko supplied 155,250,231
KWh to EWSA during the year ended 30 June 2014. Such negative price variance
adversely affects sustainability of power generation if power from alternative energy
sources is not injected into the National Grid.
The above factors affect the sustainability of power production and distribution and require a
concerted effort by management of the Rwanda Energy Group (REG) that has since
succeeded EWSA, and stakeholders within Government. It is recommended and hoped that
the new management team at REG and its subsidiaries will champion implementation of
Government initiatives to ensure an efficient and sustainable energy sector.
5.3.3 DELAYED COMPLETION OF PROJECTS
5.3.3.1 Gishoma Peat power project
There are notable delays of over 24 months in completion of Gishoma Peat project. Water
supply to the power plant is not yet completed. REG has now provided generators for
CIMERWA. The power plant is funded by a loan from Bank of Kigali of USD 30,900,000
(Frw 19,500,000,000) at interest rate of 15% per annum. Repayment of this loan was
expected to be funded from power sales proceeds from September 2014. This option did not
materialise and EWSA was utilising funds from other sources to meet interest and loan
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
55
repayment obligations. Penalties and fines for delayed loan repayments to the tune of Frw
200,039,274 were incurred by EWSA up to 31 December 2014.
5.3.3.2 Delayed water projects
Nineteen (19) water projects whose total contract amount was Frw 20,109,813,664 had
several issues including delay ranging between 3 months and over 2 years, contractual terms
not complied with leading to defects that cast doubt on the sustainability of the water supply
systems. Three (3) of the above 19 projects were relating to construction of 10 water tanks
valued at valued Frw 1,293,908,104 which were completed but no water supply connected.
5.3.4 POWER PLANTS OPERATING BELOW INSTALLED CAPACITY
The total power produced for the year ended 30 June 2014 was 71,400,135 KW (an average
of 8.17MW per hour throughout the year) for hydropower plants and yet their installed
capacity (including local private hydropower plants) was 191,844,000 KWh (21.96 MW per
hour). This resulted in power supply deficit for the year of 120,443,865 Kwh (equivalent to
13.79 MW per hour representing 63% of the installed capacity. Only one (1) hydro power
plant: Mukungwa I out of the 15 plants operated at more than 50% of the installed capacity.
Seven (7) of them did not generate any electricity during the year. These included Rugezi,
Nshili1, Nyamyotsi I, Nyamyotsi II, Mutobo, Agatobwe and Nyabahanga.
5.3.5 LACK OF ACCOUNTABILITY FOR HIGH VOLUME OF WATER AND
ELECTRICITY PRODUCED
5.3.5.1 High volume of unbilled water
Water losses at 30 June 2014 stood at 41% (the equivalent of 16,376,094 m3) compared to
target of 25% set by EWSA. The value of unbilled water varied between Frw 3,930,262,560
(if the lowest price per cubic meter of Frw 240 excluding VAT is used) and Frw
12,118,309,560 (if the highest price per cubic meter of Frw 740 excluding VAT is used).
5.3.5.2 Unexplained difference between electricity production and consumption
A total of 120,523,226 KWH of electricity (22.74% of electricity produced, equivalent to
Frw 16,150,112,284) was not accounted for in the billings for the year and yet no
reconciliation was provided by management to account for these units produced.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
56
The management of REG and WASAC, the entities that succeeded EWSA following the
restructuring in line with the Government of Rwanda reforms in the energy and water sector
need to deploy concerted effort in addressing the above issues to ensure efficient and
sustainable operations in the energy and water sectors. There is need to improve on planning
and accountability for resources put at the disposal of REG and WASAC to drive
performance of the energy and water sectors towards targets envisaged in the EDPRS II and
other national goals.
5.4 RWANDA AGRICULTURAL BOARD (RAB)
5.4.1 CONCERNS WITH IMPLEMENTATION OF THE CROP
INTENSIFICATION PROGRAM
Weaknesses continue to persist in the implementation of the crop intensification programme
in respect to failure to ensure that procured seeds reach the intended beneficiaries/farmers.
For seasons 2015A and 2015B, there were significant shortfalls in deliveries to farmers. For
example in season 2015A, only 0.9% of the requested wheat seeds were issued by RAB to the
districts. See details in the table below.
Season Type of seed Quantity
requested by
the districts
(tons)
(A)
Quantity
delivered by
RAB and Seeds
Companies
(tons)
(B)
Difference/
shortfall
(tons)
(C=A-B)
Percentage of
quantities delivered
compared to
quantities requested
(D=B/A*100)
2015A Hybrid maize 2,014.30 835.02 1,179.28 41%
2015A OPVs maize 3,189.60 453.00 2,736.60 14%
2015A Soybean 968.84 260.73 708.11 27 %
2015A Wheat 2,150 21.45 2,128.55 0.9 %
2015B Hybrid maize 1,449.10 157 1,292.10 11%
2015B OPVs maize 246.90 20 226.90 8%
2015B Wheat 1,591.07 155.65 1,435.42 9.7 %
The failure to deliver requested seeds to farmers occurred albeit RAB having quantities of
seeds in its stores. For example during the year ended 30 June 2015, RAB purchased 611.2
tons of maize seeds worth Frw 238,020,380 that had not been issued out of its stores by the
time of my audit in April 2016. At 30 June 2015, total seeds quantities in RAB stores were as
per the table below.
Type of seed Quantity in RAB stores at 30
June 2015
OPVs maize 1,640.64
Soybean 13.88
Wheat 9.8
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
57
Further Agro-dealers were unable to sell seeds to farmers with quantities of seeds not
accounted for by the Agro-dealers at the end of the seasons.
The above failures affected farmers access to seeds they needed for planting. This may have
adversely affected the yields for seasons 2015A and 2015B.
The inefficiencies in distribution of seeds ultimately affect agricultural productivity and
threaten food security in the country. RAB management in liaison with MINAGRI and other
strategic stakeholders need to review the current mechanisms of implementing the crop
intensification programme to devise means of ensuring that seeds reach the ultimate targeted
farmer.
5.4.2 SLOW RECOVERY OF FUNDS FROM SALE OF FERTILIZERS BY POST-
HARVEST HANDLING AND STORAGE TASKFORCE
The pace of recovery of funds from fertilizer sales is still very low and Post-Harvest
Handling and Storage Taskforce (PHHSTF) is still struggling to recover these balances from
distributors and agro dealers. Out of the total balance of Frw 11,650,029,461 outstanding as
at 1 July 2014, only Frw 305,487,965 (2.6%) was recovered during the year ended 30 June
2015 as shown in the table below:
Particular Amount
(Frw)
Recovery
(Frw)
Percentage of recovery
A B C=B/A
Balance as at 1 July 2014 11,650,029,461 305,487,965 2.6%
The slow rate of recovery of the fertilizer debtors threatens the sustainability of the fertilizer
fund. There is need for RAB management in collaboration with MINAGRI to establish a
clear roadmap for recovery of the outstanding balances and closely track it to logical
implementation. The funds should be utilized as a fertilizer revolving fund to boost
agricultural productivity.
5.4.3 CONCERNS IN IRRIGATION AND MECHANISATION
5.4.3.1 Vandalized irrigation system in Musheri Sector, Nyagatare District that has not
been repaired
The irrigation system in Nyagatare District covering 200ha (110 ha for sprinkler system and
90 ha for drip irrigation system) that cost Frw 2,794,948,262 to establish is currently not in
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
58
operation due to vandalism that has not been addressed by management of the Taskforce.
From the field visit conducted on 16/04/2016, it was noted that neither the sprinkler system
nor drip irrigation system was working due to equipment worth Frw 103,652,682 that had
been vandalized and stolen. Though management, indicates that the case has been reported to
police, it is important that the system is repaired promptly to bring it into operation. The
opportunity cost of keeping it idle is high in terms of negative impact on the agricultural
activities in the area.
5.4.3.2 Idle stock of agricultural machinery at Kabuye workshop
A follow up visit to Kabuye workshop in April 2016 revealed that agricultural machinery and
equipment acquired by the Irrigation and Mechanization Taskforce in previous years had
never been used and were still kept in store at Kabuye workshop. See the table below for
details:
Description Quantity Unit price
Frw
Total cost
Frw
Year of
acquisition
Combine harvester 1 48,375,000 48,375,000 2013
Riding type rice transplanters 4 5,482,500 21,930,000 2013
Trailers for power tillers 49 523,421 25,647,629 2011
Total (Frw) 95,952,629
USD USD
Walking type rice transplanters 4 3,112 12,448 2010
3 3,500 10,500 2011
Potato harvesters for power tillers 47 1,495 70,265 2010
Total (USD) 93,213
No value for money has been realized from acquisition of the above machinery.
5.4.3.3 Unrepaired agricultural machinery and equipment
Agricultural machinery and equipment including tractors and power tillers among others that
broken down continues to be parked at the workshop compound without being repaired, as
summarized in the table below:
Description of item Number of broken down and not repaired
Tractors 28
Power tillers 15 HP 7
Power tillers 12 HP 3
Agricultural mobile workshop van 1
According to ‘tractor maintenance cards’ maintained by the Head of maintenance, the major
mechanical issues to be addressed include defective hydraulic and electrical systems, broken
down engines and gear boxes, defective tyres, engine oil leakages, and defective steering
systems among others. The time the above machinery had been grounded and estimated cost
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
59
for repair could not be established because information was not recorded on the maintenance
cards for each of the grounded machinery.
Failure to repair the broken down machinery over a long period of time may result into
further deterioration leading to increased/expensive cost of repair or total damage.
Management should devise means of ensuring that the above machinery is repaired.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
60
5.5 RWANDA BIOMEDICAL CENTRE (RBC)
5.5.1 GAPS IN ACCOUNTING AND FINANCIAL MANAGEMENT AT RBC
5.5.1.1 Unexplained differences in RBC consolidated financial statements
The consolidated financial statements of RBC derived from aggregation of separate RBC
head office and MPPD financial statements contained significant differences mainly
attributed to the two divisions’ use of different accounting software and also relying on
different basis of accounting to maintain their accounting records. Due to these
incompatibilities, RBC has not been able to prepare reliable consolidated financial
statements. Significant differences noted in the consolidated financial statements as shown in
the table below.
Particulars of
affected
components
Balance as per
RBC Head
Office Financial
statements
(A)
Balance as per
MPDD
Financial
statements
(B)
Expected
Consolidated
balance
(C = A + B)
Balance as per
RBC
Consolidated
Financial
statements
(D)
Difference
(E = C - D)
Frw Frw Frw Frw Frw
Other revenue 297,090,178 1,016,026,153 1,313,116,331 1,740,625,988 (427,509,657)
Use of Goods and
Services 36,184,546,648 17,121,404,345 53,305,950,993 54,269,808,624 (963,857,631)
Other Expenses 3,839,069,520 1,331,447,608 5,170,517,128 4,618,412,247 552,104,881
Capital
Expenditure 8,308,444,099 1,297,119,096 9,605,563,195 9,571,931,695 33,631,500
Accounts
Receivable and
Advances 831,805,432 6,561,988,770 7,393,794,202 7,198,436,729 195,357,473
Accounts Payable 1,299,196,724 18671752752 19,970,949,476 19,898,518,722 72,430,754
There is need to separate financial reporting of MPPD from the rest of RBC. In addition,
RBC management needs to enhance controls over the financial reporting close process to
ensure that balances in the books of account are properly reported in the financial statements.
5.5.1.2 Significant unsupported transactions and balances of expenditure, debtors,
creditors and omission of bank account
The financial statements of RBC contain significant unsupported transactions and balances, a
manifestation of failure of RBC to properly account for funds put at its disposal. Notable
balances are summarised in the table below.
Particulars Amount
Frw
Expenditure incurred in 2014/2015 not supported by any verifiable documents 3,251,113,184
Expenditure incurred in 2014/2015 that was partially supported 1,443,479,270
Unsupported debtors balances 1,011,680,440
Unsupported creditors balances 2,233,692,660
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
61
Bank account omitted from the books of account 16,467,702
In addition, the books of account contained unsupported adjustments of Frw 405,505,451,
Frw 17,540,371 and Frw 7,809,157 on opening balances of cash and bank, accounts
receivable and payable respectively. The value of stock of medicine counted at 30 June 2015
of Frw 28,595,779,999 was less than stock value per books of account of Frw
29,309,453,869 by Frw 713,673,870.
The books of account and financial statements of RBC do not show a true and fair view of its
financial affairs and position.
5.5.2 INCREASING CASES OF EXPIRED DRUGS
RBC/MPPD continues to experience high levels of expiry of drugs due to failure to set and
monitor appropriate stock levels. Drugs and medical consumables worth Frw 1,213,019,238
of RBC/MPDD own stock expired between 2010 and 2015. In addition, donor stock under
the management of RBC/MPDD worth Frw 2,672,054,413 expired between 2012 and 2015.
Refer to the tables below.
RBC/MPDD own stock Value of expired drugs
Description Frw
Expiries for the year ended 31/12/2010 – MPPD stocks 82,909,311
Expiries for the year ended 31/12/2011 – MPPD stocks 114,796,356
Expiries for the year ended 31/12/2012 – MPPD stocks 156,639,495
Expiries for the year ended 31/12/2013 – MPPD stocks 158,309,268
Expiries for the year ended 30/06/2014 – MPPD stocks 270,796,264
Expiries for the year ended 30/06/2015 – MPPD stocks 429,568,544
Cumulative expiries from 2010 to 30 June 2015 1,213,019,238
Donor stock under the management of RBC/MPDD
Value of expired drugs
Description Frw
Expiries for the year ended 31/12/2012 – donors’ stocks 710,654,452
Expiries for the year ended 31/12/2013 – donors’ stocks 509,501,081
Expiries for the year ended 30/06/2014 – donors’ stocks 693,162,644
Expiries for the year ended 30/06/2015 – donors’ stocks 758,736,236
Cumulative expiries from 01 January 2012 to 30 June 2015 2,672,054,413
MPPD management should ensure that mechanisms are put in place to determine appropriate
quantities of drugs and other medical supplies to be procured in light of the anticipated usage
requirements. Re-order levels for each stock item should be determined and set in the stock
management system and strictly observed in procurement of stock items.
Management should ensure strict adherence to minimum shelf-life requirements and these
requirements should be clearly stipulated in contracts with suppliers. There should be proper
inspection of deliveries and any items found not to comply should be rejected out-rightly.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
62
5.6 RWANDA EDUCATIONAL BOARD (REB)
5.6.1 PERSISTENT WEAKNESSES IN IMPLEMENTATION OF ONE LAPTOP
PER CHILD PROGRAM
5.6.1.1 Unused Laptops still packed in boxes and cupboards at the schools
The problem of unutilised laptops highlighted in previous Auditor General’s reports has not
yet been resolved by REB. A visit to 20 schools during the audit of REB in March 2016
revealed that laptops are still kept in boxes and cupboards in some schools. These cases were
noted in Groupe Scolaire Kibali and Groupe Scolaire Kageyo schools in Gicumbi district,
Groupe Scolaire Cyambwe in Kirehe district, GS Kabyaza, Centre Scolaire Bigorwe and
Ecole Primaire Bigorwe in Nyabihu District, Groupe Scolaire Kinyinya in Gasabo District,
GS Gahanga I and GS Busanza in Kicukiro. Some cases are illustrated in the photos below.
Laptops still kept in boxes at GS Kageyo in Gicumbi District
Laptops still kept in cupboard at GS Kinyinya in Gasabo District
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
63
The underutilisation is attributed to the following challenges:
Lease keys (password) provided by REB could not unlock some of the laptops;
Lack of programs; and
Lack of training, delayed training or insufficient training hence the teachers are not
competent enough to train students.
These cases were noted in schools in Kirehe, Gasabo, Kicukiro, Gicumbi and Nyabihu
Districts.
The continued failure to address challenges in implementation of the One Laptop per child
programme will ultimately affect realisation of the programme objectives albeit the
significant investment by the Government. REB and all stakeholders involved in
implementation of the programme should ensure that a clear strategy is established and
elaborated to guide management of the programme as recommended in my previous annual
report. The strategy should address concerns at REB level as well as those at the lowest
beneficiary level at primary schools.
5.6.2 CONCERNS ON MANAGEMENT OF CONTRACTS FOR SCHOOL
CONSTRUCTION
5.6.2.1 Diversion of school construction materials
REB transfers school construction materials to different districts according to number of
classrooms, latrines, libraries and teachers’ hostels to be constructed in each phase. When the
materials are received by the districts, they transfer them to schools’ sites.
However, the audit identified cases where materials (balances) from different sites were
diverted to infrastructures which were not planned for. These include 2386 iron sheets, 2500
sacks of cement, 138 ridges, 1460 tubes, and 2600 iron bars. For the case of Nyagatare
District, 631 iron bars were distributed but the District did not acknowledge of 484 iron bars.
Diversion of school construction materials to other school infrastructure that were not
planned for may hamper the objective of school construction activities.
5.6.2.2 Excess cement sent to Muganza sector in Rusizi District
The audit identified that Muganza sector received excess of 586 bags of cement worth Frw
5,860,000 as shown in the table below.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
64
Cement required by Sector 2,650 bags
Cement delivered 3,236 bags
Excess cement delivered 586 bags
The excess bags are in stock and getting damaged. See pictures below:
Damaged 8 bags of cement, at Muganza sector Pictures taken on 16th March 2016
Excess of 586 bags of cement not needed, Pictures taken on 16th March 2016 at Muganza
sector
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
65
Sending excess bags where they are not requested and needed while other districts received
insufficient materials, is an indication that REB and Districts are not planning properly
together and they are not in full control of construction materials for school infrastructure.
There is a risk of misuse and wastage.
5.6.2.3 Schools constructed in high risk zones
Section 2.5 on new site selection from child friendly school infrastructure standards and
guidelines states that the site must be located away or protected from environmental risks and
hazards1 (natural and man-made) i.e. from flooding and landslides. The physical verification
carried out from 8th to 26th March 2016 identified four schools that were constructed in high
risk zones and are exposed to risks such us landslides and flooding. No protection measures
have been put in place to mitigate these risks. The affected schools are shown in the table
below accompanied by pictures taken at the time of field visit.
S/N School Sector District risk
1 Ngara Primary School Bumbogo Gasabo Landslide
2 GS Murira Muganza Rusizi Flooding
3 GS Murico Gasaka Nyamagabe Landslide
4 GS Mugina Nyamiyaga Gicumbi Swamp area
Pictures taken on 25th February 2016 of Ngara Primary School showing front site not
protected from environmental risks and hazards
1 Child friendly school infrastructure standards and guidelines issued in August 2009 on page 8
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
66
Pictures taken on 25th February 2016 of Ngara Primary School showing back site not
protected from environmental risks and hazards
Pictures taken on 16th March 2016 in G.S Murira showing constructed classrooms near
the river which started causing flooding
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
67
School Dangerous landslide getting close to Murico School, Pictures taken on 19th March
2016
Picture taken on 19th March 2016 at Murico School Dangerous landslide
5.6.2.4 Uncompleted and abandoned school infrastructure
From 2012, REB took over the school construction activities (classrooms, latrines, Libraries,
science laboratories, teachers’ hostels and other infrastructures). These construction activities
are conducted using unconventional methods where REB is supplying part of materials and
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
68
another part is supplied by schools themselves in collaboration with sectors. Constructions
are also conducted in phases starting from the year 2009/2010. At the time of auditing school
construction, the activity was in its 7th Phase (2015-2016) and site visits conducted from 24th
to 26th February and from 14th to 26th March 2016 identified that construction works at seven
(7) had not been completed as shown in the table below accompanied by pictures taken
during the site visit.
District Sector School name Type of
building Phase Status
Gasabo Rutunga 1. GS Rutunga Latrines Phase IV 12 latrines not completes and
not in use
2. EP Gasabo Latrines Phase VI 12 latrines not completes and
not in use
Rusizi Gikundamv
ura
3. G.S
Nyabihanga
Classrooms Phase I 3 classrooms not completed
and not in use
Nyamagabe
Cyanika
4. G.S St
Nicolas
Cyanika
Latrines Phase IV,V 15 toilets not completed and
not in use
Latrines Phase IV
11 latrines not completed and
not in use some are getting
damaged
Gasaka 5. G.S Murico Latrines Phase I, II, IV 18 Latrines not completed
and not in use
Nyagatare Rwimiyaga
6. G.S
Gacundezi Latrines Phase II
14 latrines not completed and
not in use
7. G.S Shonga Latrines Pase IV 13 latrines not completed and
not in use
For more details, refer to the some of the pictures below:
Inside of 3 classrooms ’constructed in phase 1 not yet completed and not in use at
Nyabihanga Secondary School, Picture taken on 15th March 2016
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
69
Uncompleted toilets of phase 4 and getting damaged at GS Gacundezi, Picture taken on
24th March 2016
Uncompleted toilets of phase 4 at ES Shonga, Picture taken on 25th March 2016
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
70
Uncompleted school infrastructure in use
Some of the incomplete structures at the schools were already in use. These include
classrooms and teachers’ hostels shown in the pictures below.
Constructed classrooms in phase I not completed, Pictures taken on 16th March 2016 at
Groupe Scolaire Gakenke
Classrooms constructed in phase II not yet completed, Pictures taken on 25th March 2016
at ES Shonga
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
71
Pictures taken on 18th March 2016 in GS Saint Nicolas showing teachers’ hostel not yet
completed
5.6.2.5 School infrastructure constructed without water drainage system and retaining
walls
When rainwater falls, water drainage system and retaining walls are very important to protect
the walls of buildings from water and landslide. However, cases were noted where school
infrastructure was constructed without water drainage system and retaining walls. The cases
were noted at Nyabihanga secondary school at Gikundamvura Sector in Rusizi District and
teachers’ hostel at Saint Nicolas School in Cyanika Sector, Nyamagabe District. See photos
below.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
72
Lack of water drainage and retaining wall at Nyabihanga School, Pictures taken on 15th
March 2016
Lack of water drainage and retaining wall at Groupe Scolaire Saint Nicolas, Pictures
taken on 18th March 2016.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
73
5.7 UNIVERSITY OF RWANDA (UR)
5.7.1 ACCOUNTING AND FINANCIAL MANAGEMENT ISSUES AT UNIVERSITY
OF RWANDA
For the year ended 30 June 2014, former entities merged into University of Rwanda
undertook financial management and reporting separately. These entities still face significant
weaknesses in accounting and financial management. All the entities under UR got qualified
audit opinion on both financial statements and compliance aspects as shown in the table
below.
Former institution higher learning merged into
University of Rwanda
Audit opinion issued
on financial
statements
Audit opinion issued
on compliance with
laws and regulations
1 National University of Rwanda (NUR) Adverse Adverse
2 Kigali Institute of Science and Technology (KIST) Adverse Adverse
3 KIST Consulting Company Ltd (KISTCO Ltd) Adverse Adverse
4 Kigali Health Institute (KHI) - College of Medicines
and Health Sciences (UR/CMHS)
Adverse Adverse
5 KHI Business Development Limited (KHIBD Ltd) Adverse Qualified
6 Kigali Institute of Education (KIE) - College of
Education (UR/CE)
Adverse Adverse
7 School of Finance and Banking (SFB) - College of
Business and Economics (UR/CBE)
Adverse Adverse
8 Umutara Polytechnic (UR Nyagatare Campus) Adverse Adverse
9 Kavumu College Adverse Adverse
10 ISAE - College of Agriculture, Animal Sciences and
Veterinary Medicine (UR-CAVM)
Adverse Adverse
11 Rukara College of Education Adverse Adverse
Major accounting and financial management issues at UR include the following:
5.7.1.1 Long outstanding receivables
The assets inherited include long outstanding receivables due from various students which
amounted to Frw 1,616,633,429 at 30 June 2014. These balances have been outstanding
between one (1) and twenty (20) years.
Former institution higher learning merged into University of
Rwanda
Accounts
receivable
Frw
Period in
arrears as at
30 June
2014
Frw
1 National University of Rwanda (NUR) 489,269,844 1-20 years
2 Kigali Institute of Science and Technology (KIST) 527,943,213 1-13 years
3 Kigali Health Institute (KHI) - College of Medicines and Health
Sciences (UR/CMHS)
160,193,476 3 years
4 Kigali Institute of Education (KIE) - College of Education (UR/CE) 96,820,172 4-9 years
5 School of Finance and Banking (SFB) - College of Business and
Economics (UR/CBE)
130,838,874 2-4 years
6 Umutara Polytechnic (UR Nyagatare Campus) 211,567,850 3 years
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
74
Total 1,616,633,429
Some of students owing the above balances completed their studies and were issued
clearance certificates and some of the balances are not supported by any verifiable
documents. Recoverability of this amount is doubtable.
5.7.1.2 Unallocated bank deposits/receipts
Included in the financial statements under accounts payable of some former public higher
learning institutions are unallocated receipts with closing payables balances of Frw
502,502,440 as at 30 June 2014. UR-Huye Campus accounts for 83% of this amount.
Unallocated receipts were mainly due to failure by management to allocate bank deposits to
individual student accounts.
Former institution higher learning merged into University of Rwanda Unallocated
deposits
Frw
1 National University of Rwanda (NUR) 417,927,484
2 Umutara Polytechnic (UR Nyagatare Campus) 49,118,766
3 College of Agriculture, Animal husbandry and Veterinary Medicine (formerly
ISAE) 9,581,774
4 College of Business and Economics (formerly SFB) 10,728,345
5 College of Medicine and Health Sciences (formerly KHI) 15,146,071
Total 502,502,440
5.7.1.3 Unsupported balances in the books of account
Books of account for entities under UR contained significant unsupported balances including
unsupported revenue of Frw 92,171,600, unsupported expenditure of Frw 1,073,317,235,
unsupported debtors of Frw 246,646,334 and unsupported creditors of Frw 2,233,142,913.
Details are provided in the table below.
Former institution higher learning
merged into University of Rwanda
Revenue
Frw
Expenditure
Frw
Accounts
receivable
Frw
Accounts
payable
Frw
1 National University of Rwanda (NUR) 41,200,148 - 51,815,272 277,789,100
2 Kigali Institute of Science and
Technology (KIST)
- 911,072,132 140,876,814
527,638,757
3 Kigali Health Institute (KHI) - - 53,954,248 336,958,474
4 Kigali Institute of Education (KIE) 50,971,452 80,033,281 - 455,837,643
5 School of Finance and Banking (SFB) - 78,360,577 - 198,044,870
6 Umutara Polytechnic - - - 435,241,077
7 Kavumu College - - - 1,632,992
8 Rukara College of Education - 3,851,245 -
Total 92,171,600 1,073,317,235 246,646,334 2,233,142,913
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
75
5.7.1.4 Weaknesses in accounting for internally generated revenue
Cases of recording revenue to the tune of Frw 992,596,083 in the books of account basing on
bank statements without source documents continue to occur. Refer to the table below for
details.
Former institution higher learning merged into University of Rwanda Amount
(Frw)
College of Arts and Social Sciences (formerly NUR) 69,889,562
College of Business and Economics (formerly SFB) 494,371,320
Rukara College of Education 160,917,131
Kavumu College of Education 267,418,070
Total 992,596,083
At former National University of Rwanda, completeness of consultancy revenue amounting
to Frw 1,095,357,718 could not be confirmed due to the absence of reconciliation of reported
revenue to specific contracts.
5.7.2 SLOW IMPLEMENTATION OF AUDIT RECOMMENDATIONS BY UR
COLLEGES
Most UR colleges had not implemented majority of my audit recommendations made in
audits of former higher institutions of learning that were merged into UR. UR colleges
implemented an average of only 38% of the audit recommendations as shown in the table
below.
Former institution higher learning merged into University of Rwanda Percentage of
audit
recommendations
implemented
1 National University of Rwanda (NUR) 46.47%
2 Kigali Institute of Science and Technology (KIST) 40%
3 Kigali Health Institute (KHI) - College of Medicines and Health Sciences
(UR/CMHS)
35%
4 KHI Business Development Limited (KHIBD Ltd) 55%
5 Kigali Institute of Education (KIE) - College of Education (UR/CE) 35%
6 School of Finance and Banking (SFB) - College of Business and Economics
(UR/CBE)
22%
7 Umutara Polytechnic (UR Nyagatare Campus) 14%
8 ISAE - College of Agriculture, Animal Sciences and Veterinary Medicine (UR-
CAVM)
42%
9 Rukara College of Education 52%
Average 38%
The persistent weaknesses in UR processes continue to negatively affect its ability to
efficiently and effectively manage public finances.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
76
5.8 RWANDA DEVELOPMENT BOARD (RDB)
5.8.1 LOW LEVEL OF IMPLEMENTATION OF REGIONAL INFORMATION AND
COMMUNICATION TECHNOLOGIES FOR EXCELLENCE PROJECT AT
RDB
On 08th April 2011, the Government of Rwanda signed a loan agreement with African
Development Bank for the construction of Regional Information and communication
technologies for excellence (RICTCE) worth UA 8,600,000 (approximately USD 13.2
million) for the construction and furnishing of the school with the necessary equipment.
Implementation of the agreement is expected to end on 30 June 2016. By 30 June 2015, only
AU 553,340 (approximately USD 850,000) representing 6.43% of the approved total budget
had been utilised. Though a construction contract for the Regional ICT Centre of Excellence-
Kigali Campus was signed with China Civil Engineering Construction Corporation (CCECC)
Ltd on 13 May 2015 worth Frw 7,399,859,510.78, RDB had not extended electricity and
enough water necessary for execution of works. RDB had also not officially handed over the
site to the contractor. Works were still at site clearing and excavation stage on 31st August
2015.
Failure to adequately monitor and support implementation of the project will ultimately delay
realisation of the envisaged benefits from the project.
5.8.2 CONCERNS ON UTILISATION OF ICT TOOLS: CASE OF DOCUMENT
TRACKING & WORK FLOW MANAGEMENT SYSTEM (DTWMS) - E-
MBONI AT RDB
The Government of Rwanda has made ICT one of the priority areas and essential for reaching
the Vision 2020 goal of transforming Rwanda into a knowledge-based economy. The
National ICT Strategy and Plans (NICI) I, II and III were developed to realize the national
vision of developing the sector. The third plan, NICI III focused on the development of
services by leveraging ICTs to improve service delivery to citizens.
NICI III (2011-2015) had 59 projects which include ‘Document Tracking and Work-flow
Management System (DTWMS). This was initiated to cater for government processes being
largely paper-based and numerous systems not integrated causing duplication and hindering
efficient service delivery.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
77
The Government has invested USD 2,681,112.62 in acquisition of the Document Tracking
and Work-flow Management System (DTWMS). However, the results of audit revealed that
the project is not achieving the intended objectives mainly due to the fact that RDB
implemented the system without a concept document elaborating the objectives of the
project, the activities to be undertaken, key performance indicators, stakeholders and their
roles and responsibilities.
DTWMS being one of 59 projects implemented under NICI III (2011-2015), weaknesses
identified in its planning and implementation might be cross-cutting in other NICI III 58
projects.
Key concerns include:
5.8.2.1 Absence of key performance indicators to check the progress of DTWMS
RDB have not put in place key performance indicators that will be used to trace the progress
in the implementation of the project in public institutions. Consequently, when performance
indicators are not set, the management will not be able to know whether the project is on the
right track for success.
5.8.2.2 Lack of awareness in public institutions before deployment of the system
During the audit I noted that there have not been awareness program in public institutions
before launching the system. In addition this was confirmed during the interview with the
administrators of the system in 39 sampled institutions, where the main challenges reported
was that the institution's top management are not being involved in enforcement and
implementation of the project. This affects the use of the system.
5.8.2.3 Delay in implementation of the system by RDB
From the National ICT Strategy and Plan (NICI 2011-2015), one of outcome indicators of the
DTWMS was that 50 % of government institutions will be installed with mail management
system by 2013. This includes incoming mails and outgoing mails in public institutions.
However during the audit in April 2016, I noted that there was a delay in implementing all
components of mail management system. Only incoming mails was launched in public
institutions by RDB where internally, within one institution, mails can be shared. The
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component of outgoing mails was not yet launched in public institutions (sending and
receiving documents from and to other institutions). This component would have advantage
of saving time and transport cost of delivering mails. Consequently, the objective of
improving information sharing in government processes will not be achieved at the planned
time and yet all required funding was paid.
5.8.2.4 Low utilization of DTWMS in public institutions
The Document Tracking and Work-flow Management System project was put in place, with
the purpose of improving information sharing and management thereby reducing bureaucracy
in government processes. RDB as an institution implementing the projects deployed the
system in 116 public institutions (ministries, provinces, districts and other public institutions)
and procured the user licenses and omniscan licenses to all Ministries and Districts. Other
public institutions had to pay the user and omniscan licenses on their own.
However during the physical verification, interviews done in 39 public institutions and
review of reports revealed that, 28 institutions out of 116 institutions (24.1%) had not
acquired licenses, to be able to use the system. In addition I noted that 53 public institutions
out of 84, equivalent to (63% ) which have installed the system and acquired licenses, but
have not or scanned a less number of documents during the period of 3 months. Consequently
they are minimally using the system.
In my opinion, Government is not realising value for money from funds which have been
invested in acquiring the system, licenses and maintenance cost of Frw 125,817,872 that is
being paid and will be paid continuously.
5.8.3 KEY ISSUES ON STRATEGIC MANAGEMENT OF PRIVATIZATION
ACTIVITIES
The audit of strategic management of privatization activities revealed that Government is not
realising intended benefits from the privatisation process from some of the companies
privatised. The privatisation process has resulted in Government giving away some
companies without receipt of any payments from the investors and in some instances, 14
investors have failed to adhere to the investment plans presented at time of privatisation or
failed to operate the companies as agreed in privatisation agreements. The Government has in
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some cases resorted to repossession of the privatised companies but ended up paying a higher
price for repossession than proceeds obtained at privatisation stage. Specific cases of concern
in management of privatization activities include:
5.8.3.1 Failure to conduct legal and financial audit of companies planned for
privatization
According to the Ministerial Order No 007/03/10/MIN of 07/08/2003 determining procedures
for the privatization of public services and enterprises and for the selling of government
shares in semi- public companies), Article 6 states that financial and legal audit should be
carried out at the request of privatization of Privatization Secretariat (RDB) before
privatization. However, twenty (20) companies were privatized without legal and financial
audit to conclude on the options of privatization, restructuring before privatization,
withdrawing and liquidation.
5.8.3.2 Lack of documentation to justify the deviation from required privatisation
procedures for some companies.
This was noted in the privatisation of six (6) companies at Frw 3,121,516,099. See the table
below:
No Year of
privatization Company Investor
Amount
(Frw)
1 2006 CIMERWA Rwanda Investment Group 2,777,000,000
2 2005 Gite Ituze Cyangugu Cyangugu Catholic Diocese 22,422,515
3 2006 Gikonko rice UCORIBU 157,000,000
4 2006 Nshili Kivu tea factory Group Bugeste (Leasing) 75,093,584
5 2009 Bugarama rice mill Rwamagana rice society/ICM
Rwanda 57,000,000
6 2009 Kabuye rice mill Rwamagana rice society/ICM
Rwanda 33,000,000
3,121,516,099
5.8.3.3 Companies privatised below reference value
According to the procedures manual guiding privatization, the selling price should be above
or equal to the reference value. Government should not accept offers below reference value.
However, there are cases where public companies were privatized when the amount offered
by the investor was below the reference value. It is not clear why such decisions were taken
but ultimately, this implies that the companies were privatised below the minimum selling
price. For details see the table below:
SN Name of the Company Reference value
(Frw)
Selling price
(Frw)
Difference
(Frw) %
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(A) (B) (C) (D)=(B)*100/(A)
1 Mukamira Maize 52,097,778 20,000,000 (32,097,778) 38%
2 Nkora Coffee Factory 167,668,236 108,862,000 (58,806,236) 65%
3 Gite Ituze (Cyangugu) 33,633,722 22,422,515 (11,211,207) 67%
For the case of Mukamira Maize Mill, RDB cancelled the initial agreement on grounds of
failure by investor to implement business plan and handover was conducted on 29/08/2013.
After 3 years, RDB is still negotiating with the investor on compensation claims arising from
the cancellation of the initial Privatisation agreement. It should be noted that Mukamira
Maize Mill secured a loan from the Ministry of Trade and Industry (MINICOM) amounting
to Frw 497,092,650 and this had not been settled by the time RDB cancelled the Privatisation
contract to take over the business. Any compensation claims need to be considered alongside
recovery efforts for this loan from the investor.
5.8.3.4 Failure to recover proceeds from some companies privatised for a period ranging
from 6 to 10 years.
This was noted in the privatisation of three (3) companies at Frw 335,018,757. See details in
the table below:
S/
N
Year
of
privati
zation
Companies Shares Sector Investor Delay
(years)
Amount due
(Frw)
1 2006 Gikonko Rice
Factory 100% Agribusiness UCORIBU
10
57,000,000
2 2008 IMPRISCO 100% Industry Angelique
International 8
221,018,757
3 2009 Bugarama rice
mill 60% Agribusiness
Rwamagana
Rice Society 6
57,000,000
Total 335,018,757
5.8.3.5 Loss of money during repossession of a company previously privatised.
Cases were identified where Government repossessed privatised companies due to various
reasons, but ended up paying to the investors significantly higher amounts compared to the
proceeds Government had obtained at the time of privatisation. In three (3) cases below,
Government paid Frw 449,236,908 in excess of the funds initially received from the
investors, as shown below:
SN Name of the
company
Investor Date of
privatizati
on
Date of
repossessi
on
Contract
amount
Frw
Compensati
on Value
after
repossession
Frw
Difference
Frw
%
(A) (B) (C)=(B)-(A) (D)=
(B)
*100)
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SN Name of the
company
Investor Date of
privatizati
on
Date of
repossessi
on
Contract
amount
Frw
Compensati
on Value
after
repossession
Frw
Difference
Frw
%
/(A)
1 Kibuye
Guest House
Munyampi
rwa Pascal
20/09/1999 23/09/2004 75,000,000 174,986,859 99,986,859 233%
2 Lake Ihema
Fishery
SOPEM 18/05/2005 25/06/2013 62,000,000 411,250,049 349,250,049 663%
Total 137,000,000 586,236,908
449,236,908
It should be noted that no clear plan was in place for utilisation of the repossessed
properties/companies by Government. As a consequence, some of the
properties/companies repossessed have remain non-operational or idle since the time of
repossession. This was noted for the case of Kibuye Guest House, where the place is now
a bush (12 years after the repossession).
Plot where a former Guest House was located. Photo taken by OAG on 30th March 2016
5.8.3.6 Privatized company without investor’s business plan
Business plans facilitate the select of the best equipped investor in terms technical
capabilities and this helps RDB to monitor effectively the performance of the investor.
However, in the case of Kirehe Rice Mill, RDB sold this enterprise to the investor at Frw
322,110,000 without any business plan. The investor submitted the investment plan after 7
months of operations. This indicates that technical capacity was not considered in
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privatization of Kirehe Rice Mill and limited RDB ability to monitor the performance of the
investor in the first 7 months of operations.
5.8.3.7 Inadequate monitoring of privatized companies
There is inadequate monitoring of privatized companies mainly attributable to lack of plans
or any other guidance to the RDB Privatisation team in aspects of what and when and where
to monitor. RDB does not also maintain ongoing consolidated information of all privatization
operations and does not have quarterly reports from investors as specified in contract
agreements. The number and names of entities covered in the audited period are not known.
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SECTION 6
KEY FINDINGS FROM AUDIT OF GOVERNMENT
PROGRAMS AND PROJECTS
6.1 HEALTH SECTOR PROGRAMMES AND PROJECTS
6.1.1 ACCOUNTING AND FINANCIAL MANAGEMENT CONCERNS IN
DISTRICT HOSPITALS
Most district hospitals continue to experience weaknesses in accounting and management of
funds put at their disposal. The hospitals did not maintain proper accounting records resulting
in all the eighteen (18) hospitals audited getting qualified audit opinion on their financial
statements. Three (3) district hospitals (Kibilizi, Muhororo and Ruhango) had a disclaimer
of audit opinion while 15 district hospitals obtained an adverse audit opinion.
The gaps noted in the audited financial statements included:
Omission of transactions from the books of account;
Unreconciled balances;
Unjustified suspense accounts;
Unsupported transactions;
Lack of preparation of bank reconciliation statements;
Lack of underlying books of account (general ledger and trial balance);
Cases of lack of detailed schedules to support the reported balances; and
Gaps in management of internally generated revenue.
The above gaps are partly attributed to lack of adequate skills on the part of Hospital
Administrators who are responsible for the daily management and operation of the hospitals
including finance activities. The Hospital Administrators do not have financial management
background resulting in poor handling of accounting and financial management activities.
In addition, most of the Boards of Directors had no members with financial management
background. This makes executing the oversight role difficult mostly on financial
management matters. Specific examples include: Kabaya, Kinihira, Rwinkwavu, Nyanza, and
Masaka Hospitals.
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The management of the District hospitals should take necessary steps to improve the quality
of accounting records and ensure that all hospital operations are properly accounted for and
the underlying books of account maintained.
MINECOFIN in collaboration with the district management and MINISANTE should train
the District Hospital Directors and Hospital administrators in financial management matters.
The qualifications of Hospital administrators should be revisited to match with their
responsibilities to ably execute their role in day to day financial affairs of the hospitals and
reviewing financial reports prepared by Accountants.
The appointing authority of Board members should also put into consideration members with
financial management background.
6.1.2 PROCUREMENT AND MANAGEMENT OF DRUGS AND MEDICAL
SUPPLIES AT UNIVERSITY TEACHING HOSPITAL-KIGALI (UTH-K /
CHUK)
6.1.2.1 Challenges with provision of medical services arising from chronic stock-out of
drugs and medical supplies
The audit identified cases of stock outs for drugs and medical supplies at University Teaching
Hospital-Kigali (UTH-K/ CHUK) that are affecting operations of the hospital. The Hospital
has experienced stock outs of drugs and medical supplies for periods ranging from 14 to 458
days. This is a very big challenge for clients using mutual health insurance because they are
not reimbursed money paid when purchasing drugs in private pharmacies. This affects 80%
of UTH-K (CHUK) patients who are mainly from Ubudehe category 1 and 2 using mutual
health insurance scheme and who cannot afford to pay for themselves. These challenges are
attributed mainly to the following:
Delays in submitting requests for replenishments and lengthy procurement process
for drugs and medical supplies: There were delays by the hospital to submit requests to
MPPD (CAMERWA) for replenishment of drugs and medical supplies over last 3 years,
with delays ranging from 5 to 7 months. These requests were sometimes submitted while
there was no stock or the stock available could not serve for at least 6 months (time
required for procurement process at MPPD). Further analysis of procurement documents
from MPPD revealed that their procurement cycle sometimes exceed 6 months, with
delays ranging between 8 and 132 days in processing tenders of acquiring drugs and
medical supplies.
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A normal request made by UTH-K and processed promptly by MPPD according to their
6-month procurement cycle would result in overall time lag of 6 months from the date of
requesting and delivery. Accordingly, the above delays of 5-7 months at hospital level
and 8-132 days at MPPD level resulted in overall delays of providing drugs and medical
supplies to patients at UTH-K of between 11.3 months to 17.4 months as shown below:
Procurement activities Normal delivery
process (months)
Delivery process with
delays (months)
Time taken between request by Hospital and
commencement of MPPD procurement cycle 0 5 to 7 months
Time taken by MPPD to procure and deliver
drugs and medical supplies to CHUK 6 months 6.3 to 10.4 months
Overall time taken to request and receive
drugs and medical supplies (time taken for
patient to receive drugs requested by CHUK) 6 months 11.3 to 17.4 months
Such long delays affect quality of service delivery at the Hospital.
Partial deliveries by MPPD for drugs and medical supplies requested by UTH-K:
The above problem was exacerbated by cases where MPPD made partial deliveries to
CHUK (UTH-K) and yet the Hospital was waiting for drugs/medical supplies requested
for. This resulted in further delays since the hospital could not procure items already
ordered for from alternative sources.
Analysis of annual requests made by UTH-K to MPPD indicated that MPPD availed only
44%, 65% and 33% of the requested items for the year 2012/2013, 2013/2014 and
2014/2015 respectively. This means that 67% of drugs and medical supplies needed in
UTH-K for the year 2014-2015 were not availed, resulting in further delays for CHUK to
obtain undelivered proportions. In these cases, clients had to purchase in private
pharmacies, which is a very big challenge for 80% of UTH-K (CHUK) patients who are
mainly from Ubudehe category 1 and 2 using mutual health insurance scheme.
6.1.2.2 Current tariffs charged by UTH-K (CHUK) inadequate to cover the cost of
medication and treatment for patients
Analysis of charges paid by patients was made for 20 medical services provided by UTH-K
(CHUK) and the results revealed that at the current tariff in use at the Hospital, payments
made by 80% of UTH-K clients cover only 37% of actual cost incurred on them
(beneficiaries of mutual health scheme). For 14% of beneficiaries under MMI, RSSB and
Mutual health schemes of UR, their payments cover 67% of actual cost incurred on providing
medical services to them. This ultimately indicates that tariff set are inadequate to cover the
cost of providing medical services at the Hospital. The tariff in use by UTH-K was last
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updated in 2009. When determining the tariff to be used from 2012, the Ministry of Health
arbitrarily added 20% from the tariff which was in use in 2009. There is need for a proper
review of the tariff and adjustments to match the tariff with the cost of providing medical
care.
6.2 KEY CONCERNS FROM MANAGEMENT OF INCOME
GENERATING ACTIVITIES (IGA) PROGRAM OF FARG
6.2.1 LACK OF PROPER COORDINATION OF FARG ACTIVITIES IN DISTRICTS
Implementation of FARG activities related to Income Generation for beneficiaries is done
through district structures in line with decentralisation policy. However, there is lack of
proper coordination and ownership of the program activities given that FARG considers the
implementation of IGA program to be the responsibility of districts while districts at the same
time consider FARG as owner of the program. Funds were sent to districts without detailed
plans indicating activities and projects to be funded. This resulted in cases, where some of
the funds sent to districts did not have target projects/beneficiaries and were not utilized as
intended. FARG later on requested districts to re-allocate the funds to direct support and
construction of shelters.
6.2.2 INCOME GENERATING ACTIVITIES (IGAs) NOT PRIORITIZED BY FARG
Income generating activities program is one of the major programs intended to enable
vulnerable genocide survivors to integrate into existing national programs of self-
development and progressively phase out all FARG specific assistance programs. However,
FARG management has ranked this program number five (5) in priority among the five
programs under FARG. The funds allocated to this program have been decreasing overtime
from 13.2% of FARG budget in 2012 to 0.02 % and 0.04% respectively in 2014 and 2015 as
shown below:
Year Total FAR expenditure
(Frw)
IGA Program expenditure
(Frw) %
2012/2013 13,298,760,091 1,755,220,000 13.20%
2013/2014 16,693,402,111 2,930,000 0.02%
2014/2015 19,190,979,761 8,000,000 0.04%
Total 49,183,141,963 1,766,150,000 3.59%
While allocation of funds to other pillars of FARG activities is necessary at the moment,
sustainability of FARG support needs to be anchored on a vision of self- reliance of
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beneficiaries. This requires better strategy and resource allocation to support beneficiaries
with IGAs to increase their household incomes and enable them to become self- reliant.
6.2.3 WEAKNESSES IN MONITORING PROJECT ACTIVITIES AND
INADEQUATE ACCOUNTABILITY FOR FUNDS DISBURSED
Weak monitoring framework: There is lack of a clear monitoring & evaluation
framework to establish whether the program is making progress and dealing with
implementation challenges timely. Districts do not report to FARG regularly while FARG
has also not been able to undertake adequate follow ups on funded projects. Ultimately,
intended outcomes from this programme may not be realised.
Weak accountability system: FARG was not able to provide the status of utilization of
funds amounting to Frw 1,766,150,000 representing cumulative funds disbursed to the
districts for the IGA program from 2012 to 2015. There is no report that shows funds used
for projects, funds still in the custody of districts or sectors, and funds re-allocated to
other FARG programs. This has made it difficult for FARG to ascertain whether all
project funds were used for the intended purposes.
Some projects have failed: Some monitoring and evaluation reports from districts and
FARG covering 987 projects that received Frw 970,148,000 during the period 2012-2013,
revealed that 260 projects (26% of the 987 projects) had failed and did not realise
intended benefits from the Frw 257,650,000 disbursed to them. Some beneficiaries shared
money and diverted it to other purposes instead of investing it in the designated projects
while some livestock were abandoned or died.
The above situation of failed projects had not improved by the time of the audits in March
2016. Out of 63 projects visited during the audit, only 35% of the projects were working,
27% had failed while 38% are currently heading towards failure. This rate of project
activities failure will ultimately curtail attainment of project objectives.
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6.3 KEY CONCERS FROM AUDIT OF IMPLEMENTATION OF
CITY OF KIGALI MASTER PLAN
A Performance audit to assess whether the City of Kigali master plan is implemented in
accordance with requirements of master plan revealed that the overall excellence target in
terms of growth and development of the City of Kigali may not be achieved. During the
period from 1st October 2013 to 30th November 2015, the City of Kigali did not fully meet the
master plan requirements of orderliness and was unable to track and follow up master plan
activities. This was attributed by some of the following key issues:
Lack of proper monitoring and unreliable management information systems: A case
was identified where there was alteration of information in master plan to mislead
decision makers;
Issuing construction permits in wrong zones: Cases were noted where permits were
issued for construction in wrong zones. For example, some permits were issued to build
single residential buildings in protected areas, passive recreational area, and commercial
areas without proper documentation authorizing altering the zoning requirements in the
master plan;
Change of use without permission of the City of Kigali: There were cases where
residents changed use of land from that previously authorised use per zoning in the
master plan. For example, cases were noted where plot zoned for residential apartments
was changed into commercial units and where a single family residential house was
transformed into a factory, without consulting the City of Kigali;
Ignoring road expansion and reserves: The One Stop Centre approved projects for
construction of residential buildings in the expected road expansion areas. Issuing
permits for new and renovation in roads reserve will cost government huge funds in
terms of expropriation.
Inadequate inspection of the implementation of City of Kigali Master Plan: Kigali
City and Districts did not have a plan or any other guidance of what and when and where
to inspect and ensure consistency during inspections. The Inspection unit does not have a
database of all inspections conducted and number of permits issued; hence an increased
risk of developing substandard projects.
The City of Kigali needs to take action and put in place appropriate measures to address gaps
identified in the implementation of the Master plan in order to realize the overall excellence
target in terms of growth and development of the City of Kigali.
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6.4 KEY CONCERNS FROM PERFORMANCE AUDIT ON
MUNICIPAL SOLID AND LIQUID (SEWAGE) WASTE
MANAGEMENT IN CITY OF KIGALI
6.4.1 LACK OF SUSTAINABLE MANAGEMENT SYSTEM OF SOLID AND LIQUID
WASTE
For more than 30 years, all the collected waste in Kigali was being dumped in an open
dumpsite at Nyanza in Kigarama Sector, Kicukiro District. The site had started becoming a
threat to the environment and public health and a decision was taken to relocate it from
Nyanza in December 2011. A temporary site at Nduba unsanitary Landfill was selected to be
developed and serve as a transitional landfill for the CoK while waiting for the completion of
a modern landfill.
However, the audit identified that Nduba unsanitary Landfill has not been developed to
address the environmental and public health threats that caused the re-location from Nyanza.
The method of waste disposal at Nduba unsanitary Landfill is still the same as that used at
Nyanza and hence pausing the same risks to the population. For example, there is no system
to receive and treat the sewage emptied from septic tanks from different parts of the City.
This sewage is deposited into pits dug at Nduba site without proper disposal system with a
high likelihood of overflowing down from the hill top (where the unsanitary landfill is
located) into the valley if it rains heavily.
Liquid waste deposited at Nduba unsanitary landfill: Photo taken by OAG on 25/01/2016
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A site visit to Nduba unsanitary landfill also revealed that solid waste is not segregated, as
shown in the picture below:
Unsegregated waste at Nduba unsanitary landfill. Photo taken by OAG on 25/01/2016
Lack of solid and liquid waste management plan
There is no waste management plan outlining how the City of Kigali plans to manage, and
dispose off solid and liquid waste transported to the Nduba unsanitary Landfill, to avoid
creating environmental and public health problems. This waste management plan is necessary
alongside a proper environmental management plan to cater for all possible health, social,
economic and environmental hazards.
6.4.2 ENVIRONMENTAL HAZARDS AND PUBLIC HEALTH CONCERNS FOR
RESIDENTS NEAR THE UNSANITARY LANDFILL AND THOSE
DOWNSTREAM WHERE LEACHATE OVERFLOWS
Residents within 400 metres of the unsanitary landfill: According to REMA
guidelines, a distance of 400 meters should be left between the landfill location and
dwelling places. The population not fitting within that standard must be expropriated.
There were 344 plots that should have been expropriated before the establishment of
Nduba unsanitary landfill site from Taba Village and Muremure Cell. However,
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expropriation has been done for only 138 plots (40%) and the remaining occupants of the
plots are still exposed to environmental and health risks.
Residents on the hill exposed to environmental and health threats as a result of the
unsanitary landfill: There are 29 households from Rebero village, Gatunga Cell that are
not yet expropriated and exposed to environmental and health threats as a result of the
unsanitary landfill. They are using source water contaminated by Nduba unsanitary
landfill site especially when it rains. The population in this area is at risk of contracting
diseases due to unsafe water from contaminated source. However, there is no plan to
expropriate them. Photos below show one of the water sources contaminated by leachate
on the hillside.
Water source downside the unsanitary landfill where residents from Rebero village,
Gatunga Cell get water. Photo taken by OAG on 01/03/2016.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
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Solid waste disposed of on the hill downside below the unsanitary landfill. Photo taken by
OAG on 25/01/2016.
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SECTION 7
KEY FINDINGS FROM AUDIT OF LOCAL
GOVERNMENTS
7.1 CONCERNS OVER ACCOUNTABILITY IN NON-BUDGET
AGENCIES (NBAS)
7.1.1 LACK OF PROPER FOLLOW UP AND REVIEW OF NBA FINANCIAL
TRANSACTIONS
According to government financial management procedures, NBAs are required to prepare
accountability reports and submit them to the Districts. However, there was no evidence of
adequate follow up done to verify the accountability reports submitted to Districts by Non-
Budget Agencies and to follow up activities reported by NBAs. As noted in my previous
audit reports, adjustments passed on the opening balances of some NBAs were not
documented to justify their rationale. This was noted in Ruhango, Bugesera, Rutsiro,
Gicumbi, Gisagara, Muhanga, Nyagatare, Nyamasheke, Nyanza, Nyaruguru, Rwamagana
and Nyarugenge Districts.
Further, unexplained differences were noted between amounts reported in the disclosure note
for NBAs appended to the districts’ financial statements and individual financial reports of
NBAs. This was noted in Ruhango, Rutsiro, Kirehe, Kayonza and Nyarugenge Districts.
Some NBAs did not prepare monthly bank reconciliation statements as noted in Rutsiro,
Muhanga, Nyabihu, Rulindo and Rwamagana Districts.
Funds at the disposal of NBAs are prone to misuse due to absence of follow up by the
districts.
7.1.2 CONTINUED WEAKNSESSES IN ACCOUNTING FOR NON-BUDGET
AGENCIES (NBAs)
The problem of failing to consolidate transactions and balances of NBAs in the financial
statements of Districts still persists. The Ministry of Finance only requires Districts to
compile a separate report of balances of NBAs for information purposes as a disclosure note
in the financial statements. The reported balances for Districts still do not include
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transactions and balances of NBAs as they are not consolidated in balances reported in the
financial statements.
A consolidated listing of transactions and balances of NBAs in all Districts compiled by the
Ministry of Finance shows that NBAs had opening balance of Frw 39,601,807,165, total
funds of Frw 234,034,291,562 at their disposal during the year ended 30 June 2015 and
incurred expenditure of Frw 233,806,585,802, leaving unutilized balance of Frw
39,601,807,165 at 30 June 2015, as shown below:
Name of subsidiary
entity
Opening Balance
at 1 July 2014 Revenues Expenses
Fund balance at
30 June 2015
Frw Frw Frw Frw
Summary
District pharmacy 6,026,880,412 13,296,669,404 12,956,340,260 6,367,209,556
District Mutuelle de
santé (1,561,453,409) 14,730,374,457 19,688,931,934 (6,520,010,886)
Sectors 3,793,181,413 27,527,481,080 25,150,420,635 6,170,241,858
Primary Schools 724,514,043 7,569,286,979 7,387,488,603 906,312,419
Secondary Schools 3,058,316,640 35,695,269,923 34,949,465,397 3,804,121,166
District Hospitals 8,490,122,122 53,904,524,920 51,868,273,764 10,526,373,278
Health Centers 8,985,835,917 51,621,621,365 49,783,766,464 10,823,690,819
Mutual Health- Section
level 3,996,595,726 19,896,127,178 22,930,094,492 962,628,412
Vision Umurenge
Programs 6,087,814,301 9,792,936,256 9,091,804,253 6,788,946,304
Total 39,601,807,165 234,034,291,562 233,806,585,802 39,829,512,925
The fund balance of Frw 39,829,512,925 at 30 June 2015 comprises of bank balances,
outstanding receivables and payables as shown in the table below:
NBA Cash and bank Receivables Payables Total
Frw Frw Frw Frw
District pharmacy 3,382,923,725 4,356,199,248 (1,371,913,417) 6,367,209,556
District Mutuelle de santé 504,164,538 308,446,510 (7,332,621,934) (6,520,010,886)
Sectors 6,713,705,427 1,094,010,812 (1,637,474,381) 6,170,241,858
Primary Schools 1,208,557,633 155,573,193 (457,818,407) 906,312,419
Secondary Schools 4,696,099,071 1,100,418,971 (1,992,396,876) 3,804,121,166
District Hospitals 5,312,932,419 10,532,470,820 (5,319,029,961) 10,526,373,278
Health Centers 7,310,092,469 6,383,620,428 (2,870,022,079) 10,823,690,819
Mutual Health- Section level 3,855,503,799 203,572,122 (3,096,447,509) 962,628,412
Vision Umurenge Programs 4,309,542,684 2,520,504,100 (41,100,480) 6,788,946,304
Total 37,293,521,765 26,654,816,204 (24,118,825,044) 39,829,512,925
The concern of omitting balances of NBAs has been highlighted over the past four years.
However, consolidation of these balances in financial statements of the Districts has not been
done and ultimately State Consolidated financial statements are incomplete.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
95
Review of information presented in District financial statements for NBAs shows that
balances at District level are different from those included in the state consolidated financial
statements as shown in the table below:
NBA
Amounts disclosed in
State Consolidated
financial statements
Amounts disclosed
in Districts financial
statements
Difference
Frw Frw Frw
Opening balance 39,601,807,165 40,440,790,957 838,983,792
Revenue 234,034,291,562 237,425,144,687 3,390,853,125
Expenses (233,806,585,802) (237,375,691,641) (3,569,105,839)
Fund balance 39,829,512,925 44,143,733,656 660,731,078
Represented by
Bank and cash balances 37,293,521,765 39,342,922,183 2,049,400,418
Receivables 26,654,816,204 28,211,328,110 1,556,511,906
Payables (24,118,825,044) (26,559,288,524) (2,440,463,480)
Total 39,829,512,925 40,994,961,769 1,165,448,844
The above differences further illustrate the problem of inadequate monitoring and
accountability for activities of NBAs.
It should be noted that the revenue disclosed in the district financial statements includes
internally generated revenue of Frw 148,871,125,972. This amount is omitted in District
financial statements and ultimately in the State consolidated financial statements.
7.2 GAPS NOTED IN REVENUE COLLECTION BY LOCAL
GOVERNMENTS
Most of the Districts did not realize budgeted tax revenue from internal sources to facilitate
implementation of planned activities. This challenge was mainly noted in Karongi, Rubavu,
Kirehe, Nyamagabe, Rusizi, Nyabihu, Rutsiro, and Gakenke. The Districts are not able to
adequately track tax payers due to the following challenges.
Incomplete taxpayer databases: The tax databases maintained by the districts were
incomplete. In most cases they were not updated to include all eligible tax payers, lacked
important information such as location, tax payable, amount paid and outstanding amount.
There was no proper system in place to track tax payers who had fully paid their tax dues,
and those with outstanding balances to facilitate follow up of tax defaulters. This
hampered tax collection efforts especially in the districts of Rulindo, Gasabo, Nyabihu,
Rwamagana, Muhanga and Nyabihu.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
96
Lack of database for land owners: Some districts did not have databases of people with
land rights and as a result, efforts to forecast and later on collect land tax were scattered
and poorly coordinated. This was mainly the case in Huye, Rulindo and Ngoma.
There is need for the districts to make sure that tax payers databases are regularly updated
with all the necessary information. This will facilitate informed forecasting and later on
realising tax collections. Proper tracking mechanism of tax collections and tax defaulters
should be established to facilitate follow up and recovery of taxes due.
7.3 GAPS NOTED IN VUP FINANCIAL SERVICES COMPONENT
7.3.1 LOW RATE OF RECOVERY OF VUP LOANS
There are still challenges in the recovery of loans given to beneficiaries of Vision Umurenge
Program (VUP) in districts as highlighted in previous reports. A report of LODA on loan
recoveries shows that out of the Frw 19,719,254,541 disbursed from 2010 to 30 June 2014,
only Frw 10,642,670,298 had been recovered by 30 June 2015. This represents 54%
recovery rate which is still low and is likely to hamper Government’s efforts to realize the
intended objectives. Refer to the table below:
Financial year Loans disbursed from 2010 to
2014
Frw
Amount repaid from 2010 up to
30 June 2015
30-Jun-15
Frw
Year ended 30 June 2015 - 285,451,753
Year ended 30 June 2014 3,480,295,672 371,796,033
Year ended 30 June 2013 3,665,676,186 1,285,414,366
Year ended 30 June 2012 4,158,035,910 2,382,239,989
Year ended 30 June 2011 4,126,816,876 2,963,040,741
Year ended 30 June 2010 4,288,429,897 3,354,727,416
Total 19,719,254,541 10,642,670,298
There is need to put effort in addressing loan recovery challenges to ensure that loans
disbursed through VUP offices are recovered to enable realization of program objectives and
sustainability.
REPORT OF THE AUDITOR GENERAL OF STATE FINANCES
FOR THE YEAR ENDED 30 JUNE 2015
Office of the Auditor General of State Finances
97
7.3.2 NONEXISTENCE OF PROJECTS MEANT TO BE ESTABLISHED USING
VUP LOANS
The physical verification carried out in some districts revealed that some of the projects that
were to be established by beneficiaries of financial services (VUP loans) were not in
existence. For example enquires made to beneficiaries revealed that loans to the tune of Frw
150,518,240 granted to 86 groups in the districts of Gicumbi (21 groups), Nyamasheke (24
groups), Kicukiro (30 groups), Rusizi (10 groups), Nyarugenge (1 group) and Ngoma (1
group) were shared amongst group members while in some instances; the projects that were
established failed. There were also instances of ghost groups that were formed. Accordingly,
the overall objective of uplifting the welfare of the beneficiaries was not achieved and the
recoverability of outstanding loans is remote.